Tellimer

TCB: Maintaining competitive advantages

  • CASA ratio slightly decreased in Q1 21 due to seasonality of corporate customers
  • NPL ratio expected to be higher towards year-end, but TCB not projected to suffer significant increase in credit costs
  • We maintain our target price of VND50,900/share and Buy recommendation

CASA ratio slightly decreased in Q1 21 due to seasonality of corporate customers. The drop in deposit funding costs in 2020 and Q1 21 was attributed more to lower interest rate than the higher CASA ratio.

NPL ratio is expected to be higher towards the year-end. However, TCB is projected not to suffer significant increase in credit costs.

We maintain our target price of VND50,900/share and a Buy recommendation. This translates to an upside of 17% from the closing price of 4 May 2021.

2021 outlook

For 2021, NII is expected to sustain a two-digit growth rate (+25%) due to robust credit expansion (+22%) and higher NIM. Based on the expansion of the customer segment, and a wide ecosystem including real estate and retail, CASA’s balance is forecast to keep growing faster than term deposits, driving its ratio slightly up towards the end of the year. We price in a surge in average term deposit rates (+40bps) following liquidity demand for high growth rate. Divergence of average lending and deposit rates contributes to an expanded NIM (+12 bps), suiting the expectation on NIM of BOD at the end of Q1 21. As NPL surges, LLR will be strongly affected due to low base effect. Thus, we project the LLR at about 137%. Hence, the provision expenses are estimated at about VND2,900bn (+11% yoy). 2021 PBT is forecast at VND18,870bn (+19%).

We have a positive view on TCB considering its outstanding ROA, sustainable ROE and thick capital base. Regarding the core business, we appreciate the advantage of cutting-edge technology, wide self-contained ecosystem with full-service solutions and leading position in high-profile customer segment. These are expected to help sustain a competitive advantage in CASA, bond and bancassurance. Therefore, we maintain a Buy recommendation with a target price of VND50,900/share. Compared to the closing price of May 4 2021, this translates to an upside of 17%.


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