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TCB – Awaiting recovery from the second half of 2023

• In 1Q2023, TCB’s PBT reached VND 5.6 tn (or USD 0.2 mn), -17% YoY and +18%QoQ, continued to be affected by net interest income (-4% QoQ and -20% YoY) while the burden from credit costs showed sign of mitigation on a quarterly basis. Credit growth and deposit growth reached 9% YTD and 11% YTD, respectively. CASA kept plummeting to 32% in 1Q2023 from 51% at the end of 2021. Both retail and corporate CASA decreased by 6% QoQ while term deposit grew 17% QoQ, resulting in a 69bps QoQ rise in funding costs.
• NPL ratio was maintained at the low level of 0.85% in 1Q23 compared to 0.91% in 4Q22, yet was 18 bps higher than that of the same period last year. Credit cost margin (TTM) recorded roughly 0.54% in 1Q23, increasing from 0.45% in the last quarter yet was lower than that of 1Q22 and the previous period. As a result, provisioning buffer has been in a steady narrow downtrend since 2021 and 2022 to reach 134% in 1Q23, yet still among the industry’s top-tier position.
• We expect NIM and net interest margin to recover toward year end as interest rates has trended down from the end of March. 2023’s PBT and book value are forecasted to be VND 26,633 bn (or USD 1.1 tn, +4.2% YoY) and VND 38,068, respectively. We reckon that the current valuation has reflected TCB's risks related to corporate bonds and the bank's gloomy outlook for 2023, with a current PB of 0.9x. Our current target price is VND33,000 and we will update our new target price when positive signals emerge from Vietnam's economic growth landscape. Long-term investors who prefer bank stocks may consider accumulating TCB when the market experiences strong corrections.