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Company Quarterly Earnings Update – TCB VN – 2019 Q2

Summary of the H1/2019 results of Techcombank (TCB VN) 

H1/2019 results: highlights
  • TCB got approval for credit room extension in Q2 to 17%, which helped the bank to grow their loan book by 12.3% YTD (including corporate bond), driven by SME and retail clients. Customer deposit grew well by 9.3%YTD, CASA is a shining point when it rose strongly to 30.4%, even surpass Vietcombank. NPL was kept relatively stable in H1/2019 at 1.8%, although sub-standard loan increased significantly (Group 3 NPL, please refer to Appendix for explanation). TCB maintained their leading position in capital adequacy with the CAR of 15.6% in Basel II, much higher than peers.
  • H1/2019 NIM increased by 20 bps YoY to 4.1%. Fee income grew by 18.7% YoY, while operating income only rose slightly by 4.9% YoY due to lack of one-off income.
  • Operating expenses continued increasing by 31.6% YoY due to more employees. Stable NPL leads to minimal provision expenses (decreased by nearly 77.1% YoY). Overall, TCB’s pretax profit grew by 9.0% YoY, completing 48.3% 2019 company’s target and 47.5% of ours.
  • We expect TCB will utilize almost all credit room allocated, mostly to retail clients and expand to auto segment which we believe having strong growth potential. In term of capital, we see minimal pressure for Tier 2 capital given outstanding CAR.
  • We believe NIM will continue expanding in H2/2019 and 2020 thanks to high growth in retail loans. Although we are also positive on fee income with bancassurance and bond products, the growth is likely to be slower than previously expected due to promotion for payment service and normalization effects as it was quite coincidence that most of large clients of TCB issued bonds.
  • Provision expense in H1/2019 is very low, dragged down the loan loss ratio, so we believe TCB will spend more on credit cost to improve it in 2H/2019, which lead to our stable view on asset quality of TCB. Overall, we forecast the bank’s bottom line to increase by 12.3% YoY in 2019 and 18.0% YoY in 2020.

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