TPB code is continuously recommended positive, credit rating with "Stable" outlook

Based on the prosperous first quarter business results, VIS Rating rated TPBank's credit rating at AA-, securities companies such as VNDirect and SSI also continuously gave positive recommendations on TPB shares.

Appreciate TPBank's capital structure and profitability

Vietnam Investment Credit Rating Joint Stock Company (VIS Rating) has just announced the long-term issuer credit rating assessment for a number of banks. Among them, Tien Phong Commercial Joint Stock Bank (TPBank, MCK: TPB) is the highest rated bank at AA-, with a "Stable" outlook. This is the first time VIS Rating has performed a rating assessment for TPBank.

Accordingly, VIS Rating evaluates capital structure as one of TPBank's main strengths with a rating of "Strong" - near the highest level on this organization's rating scale. This reflects TPBank's success in consolidating and maintaining core customer deposits, mainly thanks to the bank's digital transformation strategy.

Over the past 5 years, CASA (demand deposits) at TPBank accounted for an average of 19% of total outstanding customer loans, higher than the average 11% of some banks in the same group. Thanks to that, the bank's average capital cost in the same period was 4.2%, about 50 percentage points lower than other banks in the same group. According to the financial report of the first quarter of 2024, TPBank's quality CASA capital ratio continued to be consolidated, reaching 23.3% (as of March 31), an increase compared to the previous quarter.

VIS Rating expects that within the next 12-18 months, TPBank's CASA will continue to maintain at a high level thanks to the bank's digitalization strategy.

Similar to the capital structure, TPBank's profitability is also highly appreciated by VIS Rating at "Strong" level. Over the past 5 years, TPBank maintained an average ROAA (return on average total assets) at 1.8%, much higher than the industry average of 1.3%. In the period 2019-2023, the bank's average NIM (net interest income ratio) is 4.1%, higher than the industry average of 3.5%.

However, TPBank's 2023 ROAA dropped to a 5-year low of 1.3% due to a sharp increase in risk provision costs. However, VIS Rating is optimistic that in the next 12-18 months, this ratio of TPBank will improve when provision costs will gradually decrease, credit growth and NIM are maintained at a stable level.

Continuously rated positive

In the recently published report on TPBank, SSI Securities Joint Stock Company also commented that although TPBank's NIM will be under pressure in 2024, it will probably narrow by 17 basis points to 3.45% during the year. However, by 2025, SSI estimates that TPBank's NIM will be at 3.77% (+2 basis points svck) thanks to credit demand including corporate and retail customers that will exceed 2024 levels.

With debt restructuring efforts, SSI estimates that TPBank's bad debt ratio will not increase much in the near future. This organization believes that TPB will continue to handle bad debt, especially retail loans. Accordingly, the bad debt ratio is expected to move sideways in 2024 before decreasing to 1.7% in 2025.

"In the medium term, economic recovery will help TPB's ROE (return on equity) maintain about 16%," SSI predicts.

In fact, TPBank's ROE in the first quarter of 2024 continued to remain at a relatively high level of 17.5% when TPBank's individual profit before tax reached more than 1,800 billion VND, an increase of about 4% over the same period last year and increased 3 times compared to the fourth quarter of 2023.

Optimistic about TPBank's growth momentum in the near future, SSI maintains a POSITIVE recommendation for TPB shares and moves the valuation basis to mid-2025 with a one-year target price of 22,700 VND/share, with potential for growth. price is 23.7%.
Previously, in early May, VNDirect Securities also issued a POSITIVE recommendation on TPB stock, with a target price of 26,800 VND/share. This company also chose TPB for the "focus" in May because of its positive business results in the first quarter of 2024 on the basis of strong growth in TOI (total operating income).

Specifically, in the first 3 months of the year, TPB's TOI increased sharply by 28% over the same period, reaching VND 4,685 billion thanks to NIM growth of 25.2%. NIM improved by 59 basis points over the same period, recording 4.1% in the first quarter of 2024. Although lending interest rates decreased, TPB was still able to improve NIM thanks to reduced deposit interest rates in the first 3 months of the year.

Capital expenditures decreased by 144 basis points over the same period (down 91 basis points compared to the previous quarter), while asset yields decreased only 81 basis points (down 167 basis points compared to the previous quarter). Non-interest income also increased by 36.4% compared to the first quarter of 2023, thanks to a sharp increase in income from investment activities. According to the announcement of business results for the first quarter of 2024, thanks to a good grasp of the market, TPBank's income from securities investment increased more than 12 times compared to the same period last year.

At the 2024 General Meeting of Shareholders, TPBank brought good news to shareholders when suddenly announcing dividend payment for 2023 (made in 2024) at a rate of 25% in cash and shares. This plan has been approved with the payment source coming from undistributed profits, after setting aside funds according to the audited financial statements. This is not the first time TPBank has brought good news to shareholders. In April 2023, TPBank spent nearly 4,000 billion to pay cash dividends to shareholders at the rate of 25% (shareholder owning 1 share received 2,500 VND).

Also in 2023, TPBank issued nearly 620 million shares to pay dividends to existing shareholders at a rate of 39.19% from the accumulated undistributed retained profits until 2021 of VND 1,536 billion, a surplus. Outstanding share capital is VND 2,561 billion and VND 2,102 billion is taken from retained profits in 2022.