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Company Quarterly Earnings Update – TCB VN – 2019 Q1

Summary of the Q1/2019 results of Techcombank (TCB VN) 

Q1/2019 results: highlights
  • TCB’s total loan book, adjusted for corporate bond, experienced modest real growth of 1.8% in Q1/2019, leaving room for real estate projects in upcoming quarters. Customer deposits grew in line with the sector by 3.2% and the current and savings account (CASA) ratio was kept relatively stable. NPL ratio stood at 1.8%, no change from the end of 2018 despite a higher amount of bad loans recognized (Group 5 NPL). TCB maintained its strong capital base with a CAR of 14.3%, much higher than some other peers. Management expects to be certified for Basel 2 in Q2/2019.
  • NIM expanded strongly by 50bps YoY thanks to high yielding corporate bonds and stable funding costs. Fee income grew by nearly 16% YoY, but total operating income fell by 5.7% YoY due to the lack of a one-off gain.
  • Operating expenses increased more aggressively than we had expected, up by 27.1% YoY due to more employees. Stable NPL lead to minimal provision expenses (decreased by nearly 80% YoY). Overall, TCB’s pretax profit grew by 1.9% YoY, completing 23% of the 2019 budget.
  • We expect 16.3% credit growth for TCB, led by mortgages and corporate bonds. Although already having high exposure to mortgages, we believe that TCB still has room for additional mortgage loans as demand for housing remains strong. Asset quality is projected to be stable thanks to the bank’s aggressive write-off strategy. In terms of capital, we see minimal pressure for Tier 2 capital given outstanding CAR.
  • Fee income from bancassurance and bond related products are likely to be the main growth drivers for TCB in upcoming years as life insurance and the debt capital market of Vietnam are still young and growing rapidly. Thanks to its leading position in these segments, we estimate TCB’s fee income to increase strongly by 28% and by 26% in 2019 and in 2020 respectively.
  • Provision expenses have normalized since 2018 and we haven’t seen large pressure on this front yet. Overall, we forecast the bank’s net profit to increase by 13.0% YoY in 2019 and 18.6% YoY in 2020.

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