STB – Successfully selling debt related to Phong Phu

We attended STB's AGM in HCMC on April 26. The main agenda was to review 2023 business results and approve 2024 targets.
The Q&A session focused on the process of selling debts related to Phong Phu and the 32.5% stake pledged as collateral in favor of VAMC. Shareholders also raised questions regarding STB’s dividend policy and rumors around the relationship between Mr. Duong Cong Minh – STB’s Chairman and Ms. Truong My Lan – VTP’s chairwoman.
2023 targets include (1) total asset growth of 10% YoY vs our full-year forecast of 14% YoY, (2) credit growth of 11% YoY vs our current assumption of 13.5% YoY, (3) funding growth of 10% vs our full-year forecast of 14%, (4) the NPL ratio to be kept below 2.0% vs our full-year forecast of 1.8%, and (5) PBT of VND10.6tn (+10% YoY) vs our full-year forecast of VND11.7tn (+21% YoY).
The conservative 2024F PBT guidance is due to the view that (1) the credit demand remained weak in Q1 2024, (2) pressure to increase deposit interest rates due to rising inflation, and (3) higher provision expenses in 2024F.
STB is confident in finishing its restructuring plan in 2024. The bank has submitted a plan to sell its 32.5% stake pledged as collateral at VAMC to SBV for six months.
No dividend payment plan is proposed for 2023.
We currently have a BUY rating for STB with a target price of VND38,100/share.

STB successfully solved debt related to Phong Phu. The bank has received 20% of the total payment and the remaining will be received in the next two years. This arrangement is due to STB’s support for the buyer to clear the legal status of Phong Phu industrial park. STB did not disclose the selling price and we expected it would be sold at VND7.9tn – the stated auction price of debt related to Phong Phu.

STB will pay cash dividends after resolving its 32.5% stake pledged as collateral at VAMC. We expect this stake issue will be solved from 2025 to 2027. Additionally, STB’s CAR ratio as of the end of 2023 was around 9% - slightly higher than the minimum requirement of 8%, therefore, we believe it is not strong enough to pay cash dividends for FY2024.

Bamboo Airways’ debts are classified as Group 1 loans. Currently, the total exposure of STB to Bamboo Airways is VND3,583bn (0.74% of the total loan book). Previously, the collateral assets for Bamboo Airways’ loans were only its shares and assets of FLC, however, the new shareholders of Bamboo Airways have added more real estate as collateral. We expect that STB will build up a higher provision buffer from 2024-2028 to partly incorporate the exposure to Bamboo Airways.