Vietnam Prosperity JS Commercial Bank (HSX-VPB)

- We reiterate our BUY rating and raise our TP by 5.5% to VND58,000, offering a total upside of +42.5%. Improving NIMs, balance sheet growth and rationalization of credit costs can potentially drive material earnings (and valuation) upgrades in 2018F.
- Due to NIM expansion in 9M 2017, we forecast VPB’s NIM will be at 8.9% in 2017F, inching up 109 bps from 7.8% in 2016. We upgrade our 2017F net interest income by 1.2% to VND20.5 trillion/USD901 million (a 27% CAGR for 2016-2019F) supported by a 18% 2016-2019F CAGR for gross loans and asset yields expansion.
- Ancillary income has seen significant improvement in 9M 2017 with net fee and commission income contributing 23% to VPB’s bottom line. Thanks to this strong improvement, we believe 2017F’s ancillary income will be at VND3.4 trillion (USD151 million, a 35% upgrade).
- With superlative growth in core business and well-managed CIR of 39% in 2017F, VPB’s bottom line is forecast to reach VND6.6 trillion (USD292 million, +68.3% Y-o-Y). Bottom line is upgraded by 21% and 14% for 2017F and 2018F, respectively.