Banking sector – FY23F guidance: some positive surprises

• As of 11 Apr 2023, 15 commercial banks (CBs) have revealed theirs FY23F business plan.
• In general, most banks set for a higher credit growth limit than the 1st quota assigned by the SBV.
• 10/15 banks aimed for a lower PBT growth amid current headwinds, but few banks targeted for an aggressive earnings growth in FY23F.

Most FY23F credit growth plan surpassed SBV’s 1st quota

Three listed SOCBs (BID, CTG, VCB) aimed for credit growth ranging 10-13%, which trails the Central bank‘s guidance of 14% for this year. Circular 26 effective since end-FY22 has lowered the LDR ratio of both BID and CTG, which provided more room for credit expansion for these two banks. Whilst ACB conservatively targeted only 10% credit growth amid current headwinds, VPB, VIB, and HDB aggressively set credit growth of 33%/25%/24% for FY23F. For VPB, we acknowledge that the recent 15% private placement with SMBC would boost its CAR, making way for higher credit growth. Also, HDB still has room to reach higher-than-peer credit growth this year, given (1) its commitment to handling weak financial institutions; (2) robust CAR of 13.4% at end-2022. Meanwhile, VIB with high focus on retail lending keeps being confident in its credit growth limit capacity this year. In general, all these credit growth plans are higher than the 1st quota banks received from the SBV.

Conservative business plans amid the current headwinds

Taking into account the possibility of lower credit demand, higher credit cost and likely rising bad debts, 10/15 commercial banks have set FY23F earnings growth lower than that of FY22A. The three SOCBs target FY23F earnings growth ranging 10 -15 % yoy; relatively in line with our forecasts. Other CBs also aimed for 10-17% PBT growth in FY23F even last year that could achieve 30-40% yoy. TCB is the only bank providing a negative growth in its 2023 PBT plan (-14% yoy) as the bank has been facing multiple headwinds due to (1) high exposure to property developers/c-bond segments, (2) high CASA outflow as clients switched to high-interest rates term deposits, and (3) lower rating from Moody.

However, few banks set FY23F aggressive earnings growth

Notably, VPB’s 2023 credit target of VND636tr (+33% yoy) and 2023 PBT target of VND 24.0tr (+13% yoy or +53% yoy excluding one-off banca upfront fee in FY22) are 10%/14% higher than our forecasts, respectively. In our view, both targets are fairly aggressive considering the current weak economic environment and VPB’s high exposure to the real estate and c-bond markets, which are going through a rough patch. STB is one of the prominent names in the sector, which will be able to deliver high earnings growth despite sector’s turbulence (FY23F PBT targets to reach VND9.5tr, +50% yoy). We believe that its NIM would be widened to 4% range whilst provision is not going to be a pressure for the bank as it had already aggressively booked provisions in the last year. Altogether, these commercial banks’ 2023 PBT target suggests management’s confidence regarding banking sector prospect, which we would view as a positive surprise.

Capital raising/M&A plan

Despite current unfavoured market, VCB announced a private shares issuance plan of 6.5% of its charter capital to financial institutions in FY23F to improve CAR by 2-2.5%, making ways to receive a higher credit growth limit. MSB also submitted to the AGM 2023 a plan to merge with another commercial bank this year, (market talks PG Bank), as some key persons from MSB have been promoted to hold important roles in PGB in the recent 2 years.

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