Earnings Report /
Vietnam

VPBank: High credit growth on strong capital base

  • 2021 – High growth at the parent bank on improved asset quality. FEC suffered high credit costs.

  • 2022 outlook – Strong capital base will ensure a high credit growth rate of 22%

  • We adjust the target price to VND46,200/share (on dilution after private placement). Recommend Buy.

Tam Pham
Tam Pham

Fishery, Insurance

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Rong Viet
14 March 2022
Published byRong Viet

VPB's 2021 consolidated PBT was roughly VND14,580bn (+12% yoy), completing 88% of the year's guidance, with the parent bank playing a leading role in growth while the unsecured consumer finance segment at FEC struggled in H2 21. The parent bank's PBT surged by 50% yoy to VND14,011bn (excluding one-off income) and FE Credit's (FEC) plummeted by 84% yoy to VND610b. Thus, the parent bank contributed 96% and FC added 4% to the total PBT of VPB.

The strong increase in equity thanks to the sale of 50% of FEC at end-2021 and the private placement of 15% in H1 22 will support credit growth. However, it still temporarily puts pressure on ROE this year. VPB will announce the plan to use new capital sources in the near future and that may affect our forecast.

Given the adjustments to growth expectations of the parent bank, lower expectations at FEC based on Q4 performance and the forecast model of the 15% private placement deal, which is likely to be completed in Q2 22, we estimate the consolidated PBT in 2022 to reach VND19,826bn (+27%), of which the parent bank's PBT is VND19,013bn (-50% or +36% in terms of core profit) and FEC's is VND2,167bn (+255%). In 2023, high credit growth will remain while NIM recovers and credit costs decrease on the back of economic growth returning to pre-pandemic levels, we expect consolidated PBT to reach VND26,585bn (+34%), of which the parent bank's PBT is VND25,498bn (+34%) and FEC’s will come in at VND3,622bn (+67%). Book values per share are VND23,001 for 2022 and VND23,010 for 2023.

The target price of VPB, adjusted for the dilution after the private placement, was adjusted from VND42,800/share to VND46,200/share. Comparing the forward P/B at the end of 2022 of 1.7x and the end of 2023 of 1.5x with the current P/B of 2.0x, VPB is now trading at an attractive valuation. Based on the closing price on 9 March 2022, we recommend Buy on VPB with a total return of 26%.