TCB - Strong credit growth & wider NIM - Earnings Flash
  • 2024-07-22T00:00:00
  • Company Research

TCB released its H1 2024 results with TOI of VND25.7tn (USD1.0tn; +37.9% YoY) and PBT of VND15.6tn (USD617mn; +38.6% YoY), fulfilling 54% and 57% of our respective FY2024 forecasts. TCB’s Q2 2024 PBT was VND7.8tn (+0.3% QoQ; +34.0% YoY). The strong increase in the bottom line in 1H 2024 was driven by (i) 40.2% and 50.0% YoY, respectively, in NII and NFI (including FX trading) and (ii) a 4.2 ppts YoY improvement in the CIR, which were partly offset by a 113% increase in provision expenses. We see a slightly potential upside to our earnings forecast for TCB, pending a fuller review.

  • 6M 2024 credit growth was 12.9% (vs the credit quota of 16.0%), with the gross loan increasing 14.2% while corporate bonds decreasing 2.7%. Q2 2024 loan growth was 5.9% QoQ, with retail loans increasing 7.2% QoQ, while corporate loans edged up at a slower pace of 4.3% QoQ.  As shared by TCB, the bank might receive a higher credit quota from the SBV in 2H 2024.
  • 6M 2024 customer deposit growth was 6.0%. Meanwhile, the deposit balance in Q2 2024 rose 5.2% QoQ. In Q2 2024, TCB’s CASA ratio decreased 3.1 ppts QoQ but rose 2.5 ppts YoY to 37.4%.
  • H1 2024 NIM increased 51 bps YoY to 4.53% vs our full-year forecast of 4.10%, which we mainly attribute to a faster YoY decrease of COF than the IEA yield. Q2 2024 NIM was 4.65% (+30 bps QoQ; +79 bps YoY) but came with a spike in accrual interest (+14.9% QoQ).
  • H1 2024 NOII was VND7.7 tn, completing 55% of our full-year forecast.
  • H1 2024 CIR decreased 4.2 ppts YoY to 28.0% vs our full-year forecast of 33.0% due to a 37.9% YoY increase in TOI outweighing a 19.7% YoY increase in OPEX.
  • Asset quality deteriorated QoQ with the NPL ratio increasing by 11 bps to 1.28% in Q2 2024 vs our full-year forecast of 1.07%. The Group 2 loan ratio decreased by 27 bps QoQ to 1.14%.
  • The annualized H1 2024 credit cost was 1.11% (vs 1.23% in 2023). In addition, TCB’s LLR was 101.0% in Q2 2024 vs 102.1% and 105.9% in 2023 and Q1 2024, respectively.

 Q2 2024 NIM inched up slightly on QoQ basis. TCB’s Q2 2024 NIM improved to 4.65% (+30 bps QoQ) due to a drop in COF (-20 bps QoQ), while the IEA yield decreased (-11 bps YoY). According to TCB, strong retail franchise and funding mix optimization helped to maintain the low cost of funds despite recent interest rate upticks. In H2 2024, per TCB, the competitive pricing environment, combined with the soft market RE in the south, might compress the NIM to around 4.0% for FY2024.

 H1 2024 NOII delivered solid growth due to strong IB fees & FX trading. Strong growth of 32.7% YoY in NOII mainly came from (1) 16.9% YoY growth in pure NFI (mainly driven by strong IB fees) and (2) a VND956bn gain from FX trading vs a VND241bn loss in H1 2023. According to TCB, NFI might grow at a slower pace in H2 2024 due to Circular 21 on the recognition and treatment of LC activities.

 TCB’s consolidated H1 2024 results 

VND bn 

 H1 2023 

 H1 2024 

 YoY 

 Q2 2023 

 Q2 2024 

 YoY 

 NII 

 12,822 

 17,977 

40.2%

 6,295 

 9,478 

50.6%

 Non-interest income 

 5,803 

 7,704 

32.7%

 3,030 

 3,942 

30.1%

 OPEX 

 (6,011)

 (7,198)

19.7%

 (2,869)

 (3,949)

37.6%

 PPOP  

 12,614 

 18,483 

46.5%

 6,456 

 9,471 

46.7%

 Provision expenses 

 (1,342)

 (2,855)

112.8%

 (807)

 (1,644)

103.7%

 NPAT-MI     

 8,952 

 12,414 

38.7%

 4,455 

 6,193 

39.0%

 

 

 

 

 

 

 

 Loan growth** 

10.9%

14.2%

3.2 ppts

0.2%

5.9%

5.6 ppts

 Deposit growth**  

6.6%

6.0%

-0.6 ppts

-1.4%

5.2%

6.6 ppts

 

 

 

 

 

 

 

 NIM 

4.02%

4.53%

51 bps

3.87%

4.65%

79 bps

 Interest-earning asset yield 

8.70%

8.26%

-44 bps

8.60%

7.54%

-106 bps

 Cost of funds 

5.18%

3.30%

-189 bps

5.24%

3.19%

-205 bps

 CASA ratio* 

34.9%

37.4%

2.5 ppts

34.9%

37.4%

2.5 ppts

 CASA ratio plus term deposits in FX    

35.8%

38.2%

2.5 ppts

35.8%

38.2%

2.5 ppts

 CIR 

32.3%

28.0%

-4.2 ppts

30.8%

29.4%

-1.3 ppts

 

 

 

 

 

 

 

 NPLs / Gross loans   

1.10%

1.28% 

19 bps 

1.10% 

1.28% 

19 bps

 Group 2 loans / Gross loans  

2.01%

0.86% 

-115 bps 

2.01% 

0.86% 

-115 bps 

 Accrued interest / IEAs  

1.35%

1.62% 

27 bps 

1.35% 

1.62% 

27 bps

Source: TCB, Vietcap — *CASA volume included demand deposits and margin deposits; ** H1 2023 and H1 2024 loan and deposit growth is 6M growth.

Overall, we see that both earnings and NIM for H1 2024 exceeded our expectations. Q2 results indicate a continued recovery. However, banks remain cautious about H2 2024. Specifically, NIM is expected to be compressed due to higher COF and increased competitive pressure on IEA yields, along with the implementation of flexible pricing schemes. Consequently, the earnings performance in H2 2024 may not be as strong as in H1 2024. However, we have observed that the bank is confident it will beat its targets set at its 2024 AGM. 

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