VCB_Preliminary 2019 PBT exceeds 16% vs. target

• Preliminary 4Q19 PBT was down 12% QoQ and down 16% YoY (source: vnexpress). These preliminary results are reported on a local website, and do not include the full financial statements.
• However, 2019 PBT (+27% YoY) reached 108% of our full-year forecast and 116% of full-year guidance.
• Retail loans dominate the loan portfolio, representing 52% of the total loans.

Our Take

Credit growth reached 16.4% YoY, in line with our forecast but higher than the initial target of 15.0% disclosed at the beginning of the year. SME and individual loans are the key driver to loan growth and NIM improvement, accounting for 52% of total loans.

PBT reached VND5.5 tn in 4Q19, down -12% QoQ and -16% YoY. However, preliminary 2019 PBT reached VND23.2 tn (+27% YoY), completing 116% of the bank’s full-year target and 108% of our forecast for 2019.

Asset quality beat our expectations. VCB’s NPL ratio was 0.77% (-21bps YoY) vs our 1.03% assumption for 2019. Loan loss coverage was 183% (+18ppt YoY) vs our 160% assumption.

Our view. We believe that NIM will continue to improve on a shift in the loan mix to increased retail lending. We estimate that NIM reached 3.05% in 2019E (+15bps YoY). Looking forward, fee income should be boosted by the bancassurance deal with FWD. We expect a US$400 mn upfront fee in 2020, with increased bancassurance revenues going forward that should improve ROE given the capital-lite nature of the bancassurance business.

We cut our recommendation on VCB to HOLD-Outperform from the previous BUY call. This is entirely a valuation call after the stock’s extremely impressive 62% YoY performance. The bank beat our 2019E PBT assumption, and we remain bullish on VCB’s earnings prospects in the years ahead with forecast ROE of 27% in 2020E. However, the stock’s 3.3x P/BV multiple after a 62% YoY rally leaves limited fundamental upside in our view. Our target price implies 5.4% TSR, which no longer justifies an outright BUY call.

For the complete report, please access here: VCB_4Q19_Express Note

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