VPB_Company Update_Jul 2021

Strong capital to drive business growth

Expanding credit growth. We expect loan growth to expand after VPB’s capital raise. Our 2021E loan growth forecast is 16% YoY.

NIM forecasts increased as we expect funding costs at FE Credit to decrease given support from its strategic partner, Sumitomo Mitsui.

We assume VPB’s credit costs will increase regardless of deferred classification downgrades. We factor in provisioning for restructured loans as the prudent method of valuing the company.

We increase our PATMI forecasts by +29% for 2021E and 31% for 2022E with increased net interest income as the key upside driver offset by increased provisioning cost forecasts.  Our increased forecasts imply earnings increase of +13% YoY for 2021E and +16% YoY for 2022E.

Our increased PATMI forecast is 7% below the consensus for 2021E. We believe that our provision assumption is higher than the Street’s.

Risk exposure to FE Credit falls by half after VPB sold 49% of FE Credit to Sumitomo Mitsui. By the same token, FE Credit’s profit contribution to VPB will also decrease by the same level. We have factored this in as minority interests in our model’s P&L and balance sheet forecasts.

Capital levels will be strong, perhaps the highest among banks in Vietnam after selling the FE Credit stake and its capital raising plans in 2021E-22E. We estimate CAR post-FE Credit deal to reach 17%.

We upgrade to HOLD-Outperform. VPB trades at 1.8x 2021E P/BV which is lower than the sector median. However, our ROE forecast of 18% is lower than that of the peer median of 19%, as the increased capital base will pressure ROE. Our target implies +9% total shareholder returns. A possible upside catalyst for the shares: VPB plans to sell a 15% stake to foreign investors in 2021E or early 2022E.

For the complete report, please access here: VPB_Company Update_Jul 2021

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