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TCB – Maintaining Good Profit Growth Momentum and Expecting Asset Quality Improvement in 2H-2024

• TCB reported a consolidated PBT of VND 15.6 trillion in the first half of the year, marking a 39% increase YoY. This growth was driven by robust increases in various income streams from a low base in the previous year, offsetting a 113% YoY rise in provisioning expenses. Specifically, NII, NFI, and other non-interest income grew by 40% YoY, 17% YoY, and 32% YoY, respectively. This PBT has fulfilled 57% of TCB's annual target and 55% of our current PBT projection.
• Asset quality slightly deteriorated in Q2, with new non-performing loans (NPLs) amounting to nearly VND 2.2 trillion, up from VND 1.8 trillion in the previous quarter, despite a lesser impact from the CIC compared to the last quarter. The NPL ratio rose by 10 bps QoQ to 1.28%. The majority of these new NPLs resulted from the rolling forward of Group 2 loans, which spiked in the previous quarter. Nonetheless, the formation of new Group 2 loans has notably decreased compared to the previous quarter, signaling a positive outlook for NPL trends in the second half of the year.
• Given the better-than-expected performance of NIM, non-interest incomes, and cost-to-income ratio (CIR), we are revising our 2024 pre-tax profit forecast upward by 4% to VND 29.2 trillion. Growth in NII (+30% YoY), based on a projected NIM of 4.4% (+30 bps YoY), and the SBV's approval of additional credit quota for TCB, raising the annual credit growth to nearly 19%, will help absorb increased credit costs (1.1% before bad debts recovery) and serve as the main driver of profit prospects.
• We are also adjusting our target price for TCB upward by 3% to VND 28,700, representing a total expected return of 31% as of August 19th, 2024, reiterating the BUY recommendation.