VPB – Aggressive guideline for 2023 post the agreement of private placement

• In 2022, the PBT of the consolidated group and parent bank were VND 21.2 tn (or USD 899 mn, +45.5% YoY) and VND 24 tn (or USD 1bn, -36.8% YoY), respectively. Excluding one-off income from divesting FC in 2021 and Banca upfront-fee in 2022, PBT’s parent bank grew +32% YoY. Adversely, consumer finance was severely impacted by the slowdown of the economy, resulting in a loss of roughly VND 2.5 tn per our estimation.
• VPB announced an agreement with SMBC on a 15% private placement deal, equivalent to a deal size of VND 35.9 tn (or USD 1.5 bn). The deal is expected to be done within Q2 or Q3 2023 per the Bank. With the strategic participation of SMBC, VPB has climbed to the top 1 largest bank in terms of equity capital (VND 140 bn, based on the financial statement at the end of 2022). Post the deal, CAR is expected to surge more than 300 bps to reach 19%. Such thick Tier 1 capital will build a solid foundation for the Bank to sustain its long-term growth.
• VPB has planned its 2023 PBT to grow 13% YoY, implying a growth of 53% in core income sources (excluding upfront fees in 2022). Despite the joining of SMBC, we think VPB’s 2023 guidance is challenging given the current weak economic outlook. Pressure on the bank’s plan will come from low credit demand and high credit cost. Conservatively, we forecast its PBT for 2023-2024 at VND  20,944 (or USD 887mn, -1.3%) and VND 31,131 bn (or USD 1.3 bn, +49%), respectively. Correspondent book value will be VND 18,700 and 20,400, respectively. We will re-evaluate our forecast when seeing signs of economic recovery.
• Poor economic outlook and weak market sentiment have put pressure on the bank’s market price, making its stock come to an attractive valuation compared to peers’. Our current target price is VND 26,000/share, offering an upside of 24% from the closing price of April 7th, 2023. Therefore, we believe that VPB is among the banking stocks that long-term investors can consider picking for your portfolio in the deep correction session.