OCB - Favorable performance paves the way for stable growth in 2024
- For the year 2023, the bank maintained high growth compared to the industry, thanks to the expansion of non-interest income (+41.9%) and effective cost control, with CIR decreasing by 280bps and credit costs decreasing by 11 bps compared to 2022. Therefore, the total operating income and net profit for the year were VND 9.5 tn (USD 388 mn) (+11.6% yoy) and VND 5.2 tn (USD 212 mn) (+19% yoy), respectively, achieving 87% of the bank's profit plan for 2023.
- According to our estimates, the bank's funding cost and asset yield witnessed a slowdown in Q4, with funding cost decreasing by 57 bps, lower than the decrease of 79 bps in asset yield. This led to a 25 bps decrease in the bank's NIM (annualized) compared to Q3, down to 3.47%. We believe the faster decline in asset yields was due to (1) strong credit growth towards the end of the year leading to shorter interest collection period, (2) the bank reducing support interest rates for customers, and (3) stronger growth in the corporate loan portfolio. However, we consider the decline in NIM to be temporary and expect NIM to improve in 2024.
- For 2024, we expect OCB to achieve a credit growth rate of 20% combined with an improved NIM of 3.73%, thanks to (1) improving demand from the retail sector since late 2023, and (2) better cash flows from well-performing businesses as support packages end, leading to a 20.5% increase in OCB's net interest income. Additionally, fee income sources (such as card services and corporate account management) and the recovery of bad debts through asset liquidation will continue to improve, compensating for the weakening effect from investment securities income. Therefore, OCB's estimated total income and net profit for 2024 are projected to be VND 11.3 tn (USD 461 mn) (+19.6%) and VND 6.2 tn (USD 253 mn) (+19.3%),
- Our target price is VND 18,100 per share, corresponding to a PBR of 1.09 and a return of 20% compared to the closing price on 01/03/2024. Therefore, we recommend a Buy for OCB.
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