Established in 2008, Tien Phong Commercial Joint Stock Bank (HoSE: TPB) is the second smallest bank in our asset tracking list and the smallest in terms of network as of December 31, 2022. TPB focuses on developing digital banking. The bank was listed on HOSE on April 19, 2018.
According to the latest analysis report, Viet Capital Securities Company (VCSC) has lowered its target price for TPB by an additional 4.4% to VND 21,500/share and adjusted its recommendation from BUY to OPTIMISTIC as the bank’s stock price has increased by 37.6% since the beginning of the year. The lower target price is mainly due to our reduced forecast for net profit after tax (NPAT) for the period 2023-2027 by an additional 8.7% (-6.2%/-8.1%/-10.4%/-9.6%/-8.2% for years 2023/24/25/26/27).
VCSC forecasts that TPB’s net income in 2023 will reach VND 6.5 trillion (+3.1% YoY), which is lower than our previous forecast by 6.2% due to (1) a 4.7% decrease in net interest income (NII) after a 13 basis point decline in net interest margin (NIM) and (2) a 17.2% decrease in non-interest income (NOII) due to inefficient operations of bancassurance and securities investment businesses, partially offset by (1) a 2.7% decrease in operating expenses (OPEX) and (2) a 32.5% decrease in provisioning expenses.
VCSC maintains its P/B target of 1.10x to reflect our concerns about (1) TPB’s loan balance to real estate investment and construction companies increasing from 12.8% in Q2/2022 to 14.5% in Q2/2023 and (2) the bank’s reserve buffer and capital buffer being affected as TPB’s loan loss coverage ratio (LLR) and CAR in Q2/2023 reached only 60.9% and 11.1%, respectively, compared to levels of 135% and 12.5%, respectively, in Q4/2022.
Risks: NIM recovery weaker than expected; (2) restructured loans under Circular No.02/2023/TT-NHNN higher than expected; (3) slower-than-expected recovery of restructured loans.
VCSC also adjusted down its NIM forecast for TPB in 2023 and 2024 by 13 basis points and two basis points, respectively, as TPB’s H1/2023 NIM decreased more sharply than expected.