TCB_Initiation

Strong deposit franchise. TCB’s 2Q24 CASA ratio of 37.4% was the second highest in the sector. CASA CAGR of 28% in 2017-2023 exhibits the bank’s focus on its individual and SME deposit franchise.

NIM is among the highest in the sector despite its lack of unsecured consumer finance exposure. This is due to the CASA deposit franchise.

Solid asset quality, with strong risk management demonstrated by its low 2Q24 NPL ratio of 1.28% and high LLR ratio of 101%.

Strong profitability: We forecast ROE of 17.2% in 2024 / 18.8% in 2025, vs. 2018-23 avg ROE of 18.4%. But the bank’s low leverage means that ROA is a superior metric for comps. We forecast ROA of 2.58% in 2024 (vs. 1.67% for the sector median) and 2.73% in 2025 (vs. 1.66% for peers).

TCB is under-leveraged, in our view, with assets/equity at 6.6x vs. the sector median of 11.6x. Vietnamese banks as a group are frequently criticized for their low solvency capital, but TCB is an exception with a healthy capital Tier 1 ratio of 14.2% at 2Q24.

Cash dividend is sustainable. The bank paid out a cash dividend for the first time in 2024. In light of cash requirements of certain shareholders, this could continue going forward, and we believe it to be sustainable given the bank’s high solvency capital / low leverage and strong ROA.

Valuation is attractive – Initiate with BUY. TCB trades at just 1.1x 2024E P/B, lower than the sector median 1.2x. We believe that TCB deserves a premium. Our target price of VND26,470 implies +23% 12M TSR.

Risk: Sector-high exposure to real estate. However, real estate exposure declined from 75% of total credit in 2Q23 to 69% in 2Q24.

For the complete report, please access here: TCB_Initiation_Aug 2024

Analyst: Tanh Tran, tanh.tran@yuanta.com.vn