TCB released consolidated results for Q1 2023 with PPOP and NPAT-MI of VND6.2tn (USD261mn; -12.1% YoY) and VND4.5tn (USD191mn; -18.3% YoY), which achieved 20.5% and 22.4% of our full-year forecasts, respectively. The decrease in the bottom line was mainly due to (1) a 19.5% YoY decrease in NII and (2) 145% YoY increase in provision expenses. These factors were partly offset by (1) a 15.2% YoY increase in pure NFI and (2) 116% YoY increase in net other income. We see a slight downside risk to our earnings forecast for TCB, pending a fuller review.

TCB reported strong Q1 2023 credit growth; corporate bond balance dropped QoQ. TCB’s Q1 2023 credit growth was 9.0% QoQ with gross loans increasing 10.7% QoQ while the corporate bond book decreased 7.9% QoQ. Q1 2023 deposit growth was strong at 8.1% QoQ and was driven by a 16.5% QoQ increase in the term deposit balance.

NIM compressed on both a QoQ and YoY basis. Q1 2023 NIM decreased 180 bps YoY from 5.92% in Q1 2022 to 4.12% in Q1 2023, which was mainly due to a 288-bp YoY increase in COF that outweighed an 87-bp YoY increase in IEA yield. We attribute the former to (1) interest rate hikes by the State Bank of Vietnam (SBV) in Q4 2022 and (2) TCB’s CASA ratio decreasing from 50.4% in Q1 2022 to 32.0% in Q1 2023. Meanwhile, the higher IEA yield was mainly thanks to the increased lending yield, which was partly offset by the YoY drop in yield from debt securities that we attribute to the change in TCB’s bond structure (i.e., corporate bonds have continued to drop since Q1 2022). Overall, Q1 2023 NII was VND6.5tn (-19.5% YoY), completing 19.3% of our full-year forecast. On a QoQ basis, Q1 2023 NIM decreased 38 bps QoQ as a 109-bp QoQ increase in COF outweighed a 58-bp QoQ increase in IEA yield.

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