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Valuation
We recommend TRACKING with TCB stock with a target price of VND 31,180/share, upside 16.6% with P/B method = 1.8x (current industry average = 1.6x). We apply P/B = 1.8x because TCB is a pioneer bank in many fields and always promotes sustainable growth, suitable for long-term investors.
Forecast of business results 2019.
BSC forecasts that in 2019, TCB will record TOI and PBT at VND 21,145 billion (+ 15.2% yoy) and VND 11,198 billion (+ 5.03% yoy). This forecast is based on the assumption (1) credit growth of + 14%, equivalent to the SBV set in 2019, (2) lending + 6.2% yoy, mobilization + 5.4% yoy, (3) NIM = 4.4% from increasing the rate of loans and restructuring loans with higher interest rates, (4) NPL = 1.36%, bad debt ratio = 94%, (5) there are no abnormal incomes , (6) off-balance debt recovery = 1,500 bil. VND.
Catalyst
(1) Expectations from sales schedule of Vin city, (2) leading in the field of corporate bonds in Vietnam with high market share.
Investment risk
(1) Growth pressure increases NPL, (2) growth depends on a large customer group.
Business update (Refer to page 2 for details)
2018 business results. In 2018, TCB recorded TOI and PBT at VND 18,350 billion (+ 12.3% yoy) and VND 10,661 billion (+ 32.7% yoy).
Net interest income + 24.6% yoy, reaching VND 11,127 billion (accounting for 60.6% TOI). Credit growth + 20.3%, NIM = 4.02% thanks to increasing casa structure and restructuring loans.
Non-interest income (39.4% TOI) continued to grow thanks to insurance, bonds and cards. Income from payment services and cash + 20.3% yoy, CK issuance underwriting operation + 210% yoy, bancassurance + 52% yoy.
Improved asset quality. Bad debt + 8.5% yoy, NPL = 1.28% (industry average = 1.65%). Bad debt coverage ratio = 85%, equivalent to the industry average (79.68%).
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