July 14h 2008

1
Tuesday, July 8
th
2014 MINI REPORT
Please refer to the disclosures of potential confict of interest and the disclaimer at the end of this report
www.hsc.com.vn
Analyst - Pham Thuy Duong
duong.pt@hsc.com.vn
According to the media Vietcombank (VCB - Outperform) posted rela-
tively strong credit growth of 6.6% YTD up to June FY2014. Overall we
likely saw growth in net interest income.

Provisioning would have increased moderately.

For 1-H FY2014, our guidance for VCBs earnings calls for VND2,700
billion (+3.7% y/y) in pretax-proft. Which puts them on target.

For the full term, HSC forecasts that VCB will earn VND5,601 billion pre-
tax proft (-2.5% y/y) on the back of 15% credit growth and 13% deposit
growth.

We also assume provision charges will jump 44% while NPLs this year
likely to come in sub 3%.

VCB is currently trading at FY2014F P/B of 1.6x vs. industry peers 1.1x.
Premium full justifed. Outperform rating.
Source: HSC calculation
Source: HSC;
Price chart Earnings and Valuation
Stock Data as of July 8
th
2014
Price (VND) 26,200
Current listed shares 2,317,417,076
Outstanding shares 2,317,417,076
52 Week high 31,800
52 week low 23,300
Price change (3 months) -16.0%
Price change (6 months) -7.4%
Price change (12 months) -4.0%
Free foat (share) 182,844,207
Trading value (VNDmil)
(average last fve trading days)
8,648
Market Cap (VNDmil) 60,716,327
Market Cap (US$mil) 2,881
Total room (no. of share) 530,456,769
Current room (no. of share) 475,075,806
Foreign owned ratio (%) 20.5%
Foreign ownership limit (%) 22.9%
Source: VCB, (F): HSC forecasts
Main Ratios FY2012 FY2013
Capital Adequacy Ratio
CAR 14.8% 13.0%
Equity/Total Assets 10.0% 9.0%
Equity multiplier=TA/Equity 10.0 11.1
Asset quality
Risk assets to total assets ratio 83.1% 79.0%
NPL group 3-5 2.4% 2.7%
Liquidity
Liquidity assets to total assets ratio 40.1% 39.9%
Interbank borrowing to total deposits 10.7% 11.7%
Proftability & Effciency
ROA 1.1% 1.0%
ROE 12.5% 10.4%
Net interest margin 3.0% 2.6%
Cost to income ratio 39.8% 40.3%
Unit: VNDmn FY2013 FY2014F %y/y FY2015F %y/y
Total assets 468,994,032 501,652,207 7.0% 566,413,322 12.9%
Total loans 274,314,209 315,461,340 15.0% 369,089,768 17.0%
Total customer deposit 332,245,598 375,437,526 13.0% 424,244,404 13.0%
Net interest incomes 10,782,402 12,393,780 14.9% 14,497,291 17.0%
Non interest incomes 4,724,952 5,192,955 9.9% 5,288,359 1.8%
Total operating income 15,507,354 17,586,735 13.4% 19,785,650 12.5%
Operating expenses (6,244,061) (6,908,134) 10.6% (7,611,344) 10.2%
Pre-provision proft 9,263,293 10,678,601 15.3% 12,174,306 14.0%
Provision expenses (3,520,217) (5,077,260) 44.2% (5,713,408) 12.5%
Proft before tax 5,743,076 5,601,340 -2.5% 6,460,899 15.3%
Net profts 4,377,582 4,369,045 -0.2% 5,039,501 15.3%
NIM 2.6% 2.8% 2.9%
Gross proft margin 60% 61% 62%
Net proft margin 28% 25% 25%
VALUATION FY2013 FY2014F FY2015F
Average outstanding shares 2,317,417,076 2,405,275,196 2,665,029,637
Year-end outstanding shares 2,317,417,076 2,665,029,637 2,665,029,637
Market price (end of period) 26,800 26,200 26,200
Market capitalization (VNDmn) 62,106,778 69,823,776 69,823,776
Market capitalization (US$mn) 2,947 3,313 3,313
EPS (adjusted) in VND 1,604 1,542 1,605
BVPS in VND 18,290 16,062 17,568
P/E (time) 16.71 16.99 16.32
P/B (time) 1.47 1.63 1.49
JS COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM
OUTPERFORM
(VCB: HSX - Financial)
July 14h 2008
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Tuesday, July 8
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2014 MINI REPORT
Please refer to the disclosures of potential confict of interest and the disclaimer at the end of this report
Page 2 www.hsc.com.vn
Increase in loans to SOEs in Q2 likely pushed YTD
credit growth to 6.6% at the end of the 1-H. With deposit
growth even stronger although deposit rates offered are
now the lowest in the sector. NIMs look unchanged on
Q1 FY2014 and overall we likely saw net growth in net
interest income. With other divisions performing fairly
well. Provisioning would have increased moderately we
think given that the effects of Circulars 02 & 09 have
been well anticipated at this bank which can easily claim
to set the pace for credit risk management and aggres-
sive provisioning.
For the full term our guidance for VCB will earn VND5,601
billion pre-tax proft (-2.5% y/y) on the back of 15% credit
growth and 13% deposit growth compared to the banks
target of 13% for both credit and deposit growth. We also
assume provision charges will jump 44% to VND5,077
as they work to complete necessary provisioning in the
current cycle as soon as possible. The bank is also ex-
panding their network quite rapidly and trying to expand
their share of the retail market backed by their traditional
strength in debit & credit cards. NPLs this year likely to
come in sub 3% as they keep a frm grip on the balance
sheet risk. VCB is currently trading at FY2014F P/B of
1.6x vs. industry peers 1.1x. Premium full justifed al-
though near term outperformance is unlikely following a
recent run. For longer term investors however we reiter-
ate our Outperform rating.
According to the media Vietcombank (VCB - Outper-
form) posted relatively strong credit growth of 6.6%
YTD up to June FY2014 or equivalent to a loan book
of VND292 trillion. Which is quite surprising because
up to May growth was up only 3.6-3.7% (equivalent
to VND284 trillion). While lendings to SMEs appear to
be stagnant, we suspect the jump was driven by some
large loans to SOE. In fact during Q2 FY2014, we no-
tice that VCB signed some big contracts with Ninh Binh
Fertilizer, PV Drilling, Vinacomin and Vietnam Rub-
ber Group offering new loans. And given VCBs strong
brand name, we estimate deposit was strong at around
10%-12% YTD. Although given that VCB currently offers
the lowest deposit rates on the market growth may have
tailed off recently. With this late surge in credit growth,
we estimate that VCBs LDR improved a tad from 78.4%
in Q1 FY2014 to 78.6% in Q2 FY2014. Then we think
other segments such as fee income either performed a
little better than expected or in line.
We also note an improvement in asset quality, given the
swap of around VND1,000 billion of bad debts to VAMC
(equivalent to 0.4% of the total loan book) in Q2 FY2014.
In any event we have held for some time that the bank
should be less affected by the implementation of Cir-
cular 02 and Circular 09 than others as they have al-
ways been conservative in loans classifcation approach
and aggressive in provisioning. Hence we estimate that
VCBs 1-H NPL ratio will be less than 3%. Set against
that however is the fact that the burden of expectation
lies with VCB to set an example in credit risk manage-
ment by continuing its aggressive provisioning stance.
For 1-H FY2014, our guidance for VCBs earnings calls
for VND2,700 billion (+3.7% y/y) in pretax-proft. Which
puts them on target to achieve their full year forecast
of VND5,500 billion. For FY2014, we keep our forecast
that VCB will earn VND5,601 billion pre-tax proft (-2.5%
y/y) on the back of 15% credit growth and 13% deposit
growth compared to the banks target of 13% for both
credit and deposit growth. We assume provision charg-
es of VND5,077 (+44% y/y), including VND220 billion in
provision for the VND1,100 billion of bad debts swapped
to the VAMC in FY2013. Generating a post write off NPL
ratio of 2.9% after writing off 1.2% of the loan book and
swapping another VND1,000-1,200 billion (equivalent to
0.32-0.38%% of total loan book) to the VAMC in FY2014.
VCB has a fairly clean balance sheet compared to peers
and strives to stay ahead of the curve in terms of credit
risk management including provisioning. Thus we view
their reported NPLs as likely to be very close to the true
fgure, in sharp contrast to some peers.
VCB is currently trading at FY2014F P/B of 1.6x vs. in-
dustry peers 1.1x. We think the valuation premium is
justifed given how the bank is operated. However after
a steady increase over the past few months we expect
the stock to be a moderate performer for the time being.
Reiterate Outperform.
VCB 1-H preview - looks likely to be in line following a jump in June credit growth. Reiterate Outperform.
July 14h 2008
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Tuesday, July 8
th
2014 MINI REPORT
Please refer to the disclosures of potential confict of interest and the disclaimer at the end of this report
Page 3 www.hsc.com.vn
INCOME STATEMENT (VNDmillion) FY2012 FY2013 %y/y FY2014F %y/y FY2015F %y/y
Interest income 31,746,997 28,298,671 -11% 31,524,928 11% 36,893,215 17%
Interest expenses (20,792,904) (17,516,269) -16% (19,131,147) 9% (22,395,924) 17%
Net interest income 10,954,093 10,782,402 -2% 12,393,780 15% 14,497,291 17%
Fee and commission income 2,250,538 2,745,171 22% 3,156,947 15% 3,472,641 10%
Fee and commission expenses (861,939) (1,125,800) 31% (1,294,670) 15% (1,424,137) 10%
Net fee and commission income 1,388,599 1,619,371 17% 1,862,277 15% 2,048,504 10%
Foreign exchange gain - net 1,487,751 1,426,859 -4% 1,598,082 12% 1,677,986 5%
Income from trading securities 76,742 22,172 -71% 50,000 126% 50,000 0%
Income from securities investment 207,631 160,461 -23% 150,000 -7% 200,000 33%
Other income 525,098 934,285 78% 1,200,000 28% 1,000,000 -17%
Equity income 468,583 561,804 20% 332,596 -41% 311,869 -6%
Total operating income 15,108,497 15,507,354 3% 17,586,735 13% 19,785,650 13%
Operating expenses (6,015,636) (6,244,061) 4% (6,908,134) 11% (7,611,344) 10%
Proft before provision loss for credit 9,092,861 9,263,293 2% 10,678,601 15% 12,174,306 14%
Provision loss (3,328,964) (3,520,217) 6% (5,077,260) 44% (5,713,408) 13%
Proft before tax 5,763,897 5,743,076 0% 5,601,340 -2.5% 6,460,899 15%
Income tax (1,336,691) (1,365,494) 2% (1,232,295) -10% (1,421,398) 15%
Net proft 4,427,206 4,377,582 -1% 4,369,045 0% 5,039,501 15%
Minority interests (23,500) (19,530) -17% (19,492) 0% (22,483) 15%
Net proft for their shareholders 4,403,706 4,358,052 -1% 4,349,554 0% 5,017,018 15%
Note: HSC forecast (F); Source: VCB reports;
July 14h 2008
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Tuesday, July 8
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2014 MINI REPORT
Please refer to the disclosures of potential confict of interest and the disclaimer at the end of this report
Page 4 www.hsc.com.vn
BALANCE SHEET (VNDmillion) FY2012 FY2013 %y/y FY2014F %y/y FY2015F %y/y
Cash and cash equivalents 5,627,307 6,059,673 8% 7,508,751 24% 8,484,888 13%
Balances with State bank 15,732,095 24,843,632 58% 18,771,876 -24% 16,969,776 -10%
Deposits with other fnancial institutions 65,712,726 91,737,049 40% 73,389,639 -20% 77,059,121 5%
Net Securities - Held for trading 520,876 195,270 -63% 232,858 19% 256,321 10%
Securities - Held for trading 521,239 196,158 -62% 233,746 19% 257,209 10%
Provision loss (363) (888) 145% (888) 0% (888) 0%
Derivatives - 136,725 - -
Net loans and advances to clients 235,869,977 267,863,404 14% 309,291,181 15% 361,870,681 17%
Loans and advances to clients 241,162,675 274,314,209 14% 315,461,340 15% 369,089,768 17%
Provision loss (5,292,698) (6,450,805) 22% (6,170,160) -4% (7,219,087) 17%
Investment securities 78,521,304 64,463,096 -18% 77,343,420 20% 85,080,256 10%
Available for sales 73,945,195 47,127,209 -36% 56,535,366 20% 62,188,903 10%
Held to maturity 4,843,173 17,360,833 258% 20,833,000 20% 22,916,300 10%
Provision loss (267,064) (24,946) -91% (24,946) 0% (24,946) 0%
Long term investments 3,020,788 3,041,790 1% 3,159,591 4% 3,283,282 4%
Affliates 733,232 707,078 -4% 722,064 2% 722,064 0%
Other long term investments 2,324,794 2,371,002 2% 2,473,817 4% 2,597,508 5%
Provision loss (37,238) (36,290) -3% (36,290) 0% (36,290) 0%
Fixed assets 3,659,582 4,085,686 12% 4,531,196 11% 5,017,749 11%
Tangible (*) 2,304,003 2,556,047 11% 2,796,500 9% 3,057,488 9%
Intangible 1,355,579 1,529,639 13% 1,734,697 13% 1,960,261 13%
Other assets 5,810,418 6,567,707 13% 7,423,696 13% 8,391,248 13%
Total Assets 414,475,073 468,994,032 13% 501,652,207 7% 566,413,322 13%
Deposits & Loans from SBV 24,806,433 32,622,411 32% 35,884,652 10% 37,678,885 5%
Deposits from Banks 34,066,352 44,044,289 29% 28,303,963 -36% 36,400,070 29%
Customer deposits 284,414,568 332,245,598 17% 375,437,526 13% 424,244,404 13%
Trusted funds - - - -
Liabilities from derivatives 5,461 - - -
Bonds & Certifcates of deposits 2,027,567 2,013,597 -1% 2,013,597 0% 2,013,597 0%
Other liabilities 27,449,714 15,532,445 -43% 17,085,690 10% 19,135,972 12%
Shareholders' equity and other funds 41,553,063 42,386,065 2% 42,806,746 1% 46,820,360 9%
Chartered capital 23,174,171 23,174,171 0% 26,650,296 15% 26,650,296 0%
Share premium 9,201,397 9,201,397 0% 9,201,397 0% 9,201,397 0%
Treasury shares - 45,160 - -
Funds 2,839,040 3,468,552 22% 4,120,985 19% 4,622,687 12%
FX revaluation 121,228 123,853 2% 82,306 -34% 82,306 0%
Asset revaluation 72,800 82,306 13% 123,853 50% 123,853 0%
Retained profts 6,144,427 6,290,626 2% 2,627,908 -58% 6,139,821 134%
Minor shareholders' interests 151,915 149,627 -2% 120,033 -20% 120,034 0%
Liabilities and Equities 414,475,073 468,994,032 13% 501,652,206 7% 566,413,322 13%
Note: HSC forecast (F); Source: VCB reports;
July 14h 2008
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Tuesday, July 8
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2014 MINI REPORT
Please refer to the disclosures of potential confict of interest and the disclaimer at the end of this report
Page 5 www.hsc.com.vn
KEY RATIOS FY2012 FY2013 FY2014F FY2015F
Size
No. of branches and sub-branches 391 406 426 436
No. of employees 13,637 13,842 14,257 14,827
Capital Adequacy Ratio
CAR 14.8% 13.0% 11.5% 10.7%
Equity/Total Assets 10.0% 9.0% 8.8% 8.4%
Equity multiplier = TA/Equity 10.0 11.1 11.4 11.9
Asset quality
Risk assets to total assets ratio 83.1% 79.0% 80.3% 80.7%
NPL ratio groups 3-5 2.4% 2.7% 2.9% 2.7%
NPL ratio groups 2-5 16.3% 10.3% 17.6% 17.4%
Loan loss reserve coverage (group 2-5) 13.4% 22.8% 11.1% 11.2%
Loan loss reserve coverage (group 3-5) 91.4% 86.3% 67.4% 72.6%
Liquidity
Liquid assets to Total assets 40.1% 39.9% 35.3% 33.2%
Loans to customer deposits 84.2% 81.1% 83.6% 86.6%
LDR at C13 78.1% 79.2% 82.4% 85.3%
Interbank borrowing to total deposits 10.7% 11.7% 7.0% 7.9%
Loans/total assets 58.2% 58.5% 62.9% 65.2%
Asset Performance
Total revenue/ Total assets 9.4% 7.7% 7.8% 8.2%
Net income/ Total revenue 12.0% 12.8% 11.4% 11.5%
Avg Earning assets/ Avg Total assets 93.6% 92.4% 92.4% 93.4%
Proftability & Effciency
ROA 1.1% 1.0% 0.9% 0.9%
ROE 12.5% 10.4% 10.2% 11.2%
Average funding cost 6.0% 4.5% 4.5% 4.8%
Average gross yield 8.7% 6.9% 7.0% 7.4%
Net spread 2.7% 2.4% 2.6% 2.6%
Net interest margin 3.0% 2.6% 2.8% 2.9%
Non-interest expenses over AEA 1.6% 1.5% 1.5% 1.5%
Net interest income/total operating income 72.5% 69.5% 70.5% 73.3%
Cost to income ratio 39.8% 40.3% 39.3% 38.5%
Growth Ratios
Asset growth 13.0% 13.2% 7.0% 12.9%
Loan growth 15.2% 13.7% 15.0% 17.0%
Deposit growth 25.3% 16.8% 13.0% 13.0%
Equity growth 45.1% 2.0% 1.0% 9.4%
Pretax proft 1.2% -0.4% -2.5% 15.3%
Net proft 4.9% -1.0% -0.2% 15.3%
Note: HSC forecast (F); Source: VCB reports
July 14h 2008
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Page 6 www.hsc.com.vn
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