VCB_Company Update

Increasing our loan growth assumptions. We expect VCB to receive a higher 2023E credit quota than the sector average given its strong balance sheet and as a reward for acquiring/restructuring a weak bank. We increase our loan growth forecast by +3ppt to 17% in 2023E.

Net interest income (net-II) forecast increased by +4% to reach VND66 tn on our higher credit growth assumption. We forecast NIM to reach 3.67% in 2023E (+22bps YoY).

Net fee income forecast slashed by -43% versus our previous overly optimistic forecast. Our new net fee income forecast is VND9.5 tn (+18% YoY) in 2023E.

Reduced provisioning assumption. Reported NPLs remain low, and VCB’s LLR ratio is a record high 402% as at 3Q22, which is the highest in the sector. Thus, VCB should have the flexibility to lower its provisioning in 2023E to boost its earnings; as such, we decrease our gross provisioning forecast by -17% for 2023E to VND10tn (-10% YoY).

We increase our PATMI forecasts by +2% for 2023E on higher net-II and lower provisioning. Our increased PATMI forecasts is 14% above the consensus for 2023E largely due to our lower provisioning assumption.

VCB merits a valuation premium. VCB has the cheapest funding cost in the sector, backed by its high CASA ratio. This is a competitive advantage vs. peers in cushioning NIM. A possible private placement would increase the bank’s capital and spur higher growth. VCB now trades at 2.2x 2023E P/BV. Our new target price implies a +18% TSR vs. the current market price, and we maintain our BUY recommendation.

Risk: 2023E actual earnings could be substantially lower than our forecast if VCB chooses not to reduce provisioning.

For the complete report, please access here: VCB_Company Update_Dec 2022

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