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JP Morgan expects a 15% PPoP CAGR in the next three years, led by 25bps y/y higher NIM this year and a 19% loan CAGR in 2020-23. The non-II outlook is robust, led by fee revenues across banks.

Vietnam Banks Offer the Best Combination of Growth and RoE in ASEAN
JP Morgan believes Vietnam banks offer the best combination of growth and RoE in ASEAN. High nominal GDP growth (link) and resilience in the last 12 months provide visibility on credit and earnings growth over the next few years. JPMorgan expects a 16% EPS CAGR for the sector over FY20-23. 
This should lead to 8-42% upside for stocks over the course of the year, and meaningfully higher in the next three years.
Hence,  JP Morgan recommends adding positions despite the 11% rally YTD (VN Index +6%) and 30% in the last three months (VN Index +19%). TCB is our top pick (confluence of high-end consumer, WM and capital markets), with ACB and VPB also offering significant upside.
JP Morgan increases FY21-22 EPS estimates for ACB/TCB/VPB by 8-11% and PTs by
22-25%. JP Morgan’s PT for VCB is unchanged after marginal changes to FY21-22 EPS estimates. TCB, ACB and VPB are trading at 1.54x/1.28x 2021E/22E P/Bs for 18- 20% ROE. This offers potential for re-rating, in addition to book value compounding. Potential catalysts for re-rating include consistency of RoE and EPSg, as well as developments on improved foreign access.
While JP Morgan EPS estimates are slightly below the Street for ACB and VCB, JP Morgan sees potential measures that could drive re-rating (e.g., NVDRs). Further, valuations provide a sufficient margin of safety, even if earnings are slightly weak. Note that JP Morgan VCB EPS estimates include contributions to the employee bonus fund.
JP Morgan expects a 15% PPoP CAGR in the next three years, led by 25bps y/y higher NIM this year and a 19% loan CAGR in 2020-23. The non-II outlook is robust, led by fee revenues across banks (bonds at TCB, bancassurance at ACB/VCB, payments at VPB). 
On the flip side, JP Morgan assumes a normalization of trading gains at ACB. Operating expenses should move up by a 19% CAGR in 2020-23 as banks scale up digital spend. However, digital adoption has improved, so JP Morgan expects cost/assets to be structurally lower in FY20-23 vs. 2019. 
Vietnam has relatively high daily active users of bank apps (as a % of the population) vs. PH, ID and IN, but lags the rest of Asia. This suggests scope for further digital spend and adoption.
Further, VPB, TCB and VCB have significantly higher market shares of downloads and DAU vs. deposits, indicating relative strength in the digital offerings of these banks within the country. Accordingly, JP Morgan expects them to press this advantage.

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