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OCB - Credit growth as a key driver of profitability

We have conducted a valuation for OCB stock and estimate its fair value at VND 11,950, corresponding to projected P/B multiples of 0.9x in 2025 and 0.8x in 2026.
Faster credit growth than the industry, supported by a solid capital buffer. OCB possesses one of the leading capital and liquidity buffers in the banking system, providing a solid foundation for sustained high credit growth over the years (with a 2019-2024 credit CAGR of 20%). We expect that in the next 5 years, OCB will be able to maintain higher credit growth than the industry average, supported by the recovery of the real estate (RE) market bring opportunities to develop home loan customers and RE project developers, along with the orientation of expanding the SMEs segment. We forecast a credit CAGR of 17% for the 2025F-2030F period.
Profit recovery as costs are being better controlled. We believe that retail lending will recover, driven by increased demand for mortgage loans in projects developed by OCB's corporate customers. This will support an expansion of the bank’s NIM in the medium term, alongside a decline in net NPLs formation as the economy recovers. The improvement in asset quality, coupled with the ongoing efforts to transfer ownership and speed up the resolution of collateralized assets (supported by the legalization of Resolution 42 on bad debt settlement), will allow OCB to make reversal and reduce credit costs in the medium term, especially a significant portion of debts with foreclosed assets awaiting settlement (21%). This leads us to expect a PBT CAGR of 22% in the 2025F-2030F period, following three consecutive years of negative growth during 2022-2024 due to mouting pressure from credit provisioning and operating expenses. We also expect digital transformation investments to help optimize operating expenses, bringing the long-term CIR down to 35%.
Valuation. OCB shares are currently trading at a P/B ratio of 0.8x, which has partially priced in the risks of rising bad debts and weakened profitability. We expect that a positive economic outlook and a recovery in the real estate market will support improvements in the bank's asset quality and profitability indicators in the long term, thereby justifying a higher valuation.
Risks. Credit growth may be constrained and asset quality may deteriorate if the recovery of the economy and the real estate market does not meet expectations, or if global macroeconomic volatility has adverse impacts.