CTG – Strong NII outweighs remaining high credit costs – Earnings Flash
  • 2024-07-31T00:00:00
  • Company Research

CTG released its H1 2024 results with TOI of VND38.7tn (USD1.5bn; +11% YoY) and PBT of VND13.0tn (USD510mn; +3% YoY), both fulfilling 46% of our FY2024 forecasts. This implies Q2 2024 PBT of VND6.7tn (+9% QoQ; +3% YoY). Overall, CTG’s Q1 2024 earnings were broadly in line with our forecasts. We see no major risk to our current earnings forecast, pending a more extensive review. 

  • H1 2024 credit growth was 6.7% (loan growth of 6.7%; corporate bonds decreased 3.1% vs Q4 2023 and accounted for 0.3% of the credit balance). 
  • H1 2024 customer deposit growth was 4.0%. The Q2 2024 CASA ratio was roughly flat QoQ at 22.8%.
  • H1 2024 NIM slightly increased by 10 bps YoY to 2.98%, which we attribute mostly to a 176-bp YoY decrease in funding costs given a 4.1-ppt YoY improvement in the CASA ratio. Q2 2024 NIM was also flat QoQ at 2.96%, with decreases in both the IEA yield and funding costs. H1 2024 NII completed 48% of our full-year forecast and was in line with our expectation.  
  • H1 2024 NOII was VND8.2tn (-13% YoY), completing 42% of our full-year forecast and tracked slightly behind our expectation due to weaker-than-expected gains from trading and investment securities and recovery income from written-off bad debts. However, on a quarterly basis, Q2 2024 NOII still increased 11% QoQ, which was supported by a 40% QoQ increase in net other income (mainly comprised of recovery from written-off bad debts).
  • H1 2024 CIR was flat YoY at 25.5% vs our full-year forecast of 28.0%. We expect some seasonal expenses in H2 2024 to increase the full-year CIR. 
  • On a quarterly basis, the NPL ratio ticked up, but Group 2 loans level improved. The Q2 2024 NPL ratio increased 22 bps QoQ to 1.57% vs our 2024F forecast of 1.20%. However, CTG’s Group 2 loan ratio decreased 15 bps QoQ to 1.44% vs our 2024F forecast of 1.25%. We expect bad debt metrics to reduce in the coming quarters as (1) the bank will accelerate its write-off rate toward the end of the year and (2) credit growth is set to be stronger in H2 2024. 
  • H1 2024 annualized credit costs spiked to 2.02% vs the average credit costs of 1.73% in 2021-2023. H1 2024 provision expenses jumped 20% YoY, completing 50% of our full-year forecast, and tracks slightly ahead of our expectation. CTG’s Q2 2024 LLR continued to decrease QoQ but remained at the high end compared to peers at 114% (-37 ppts QoQ; -55 ppts YoY).

 CTG’s consolidated H1 2024 results

VND bn 

 H1 2023 

 H1 2024 

 YoY 

 Q2 2023 

 Q2 2024 

 YoY 

 NII 

 25,424 

 30,513 

20.0%

 12,757 

 15,339 

20.2%

 Non-interest income 

 9,366 

 8,194 

-12.5%

 5,014 

 4,302 

-14.2%

 OPEX 

 (9,057)

 (9,881)

9.1%

 (4,743)

 (5,074)

7.0%

 PPOP  

 25,733 

 28,826 

12.0%

 13,029 

 14,567 

11.8%

 Provision expenses 

(13,202)

(15,866)

20.2%

 (6,478)

 (7,817)

20.7%

 NPAT-MI     

 10,010 

 10,324 

3.1%

 5,203 

 5,365 

3.1%

 

 

 

 

 

 

 

 Loan growth** 

6.6%

6.7%

0.1 ppts

2.0%

3.8%

1.8 ppts

 Deposit growth**  

4.9%

4.0%

-0.9 ppts

3.0%

2.7%

-0.3 ppts

 

 

 

 

 

 

 

 NIM 

2.88%

2.98%

10 bps

2.86%

2.96%

10 bps

 Interest-earning asset yield 

7.56%

5.97%

-159 bps

7.64%

5.82%

-182 bps

 Cost of funds 

4.95%

3.19%

-176 bps

5.09%

3.05%

-204 bps

 CASA ratio* 

18.7%

22.8%

4.1 ppts

18.7%

22.8%

4.1 ppts

 CASA ratio plus term deposits in FX    

21.6%

25.1%

3.5 ppts

21.6%

25.1%

3.5 ppts

 CIR 

26.0%

25.5%

-0.5 ppts

26.7%

25.8%

-0.9 ppts

 

 

 

 

 

 

 

 NPLs / Gross loans   

1.27%

1.57%

30 bps

1.27%

1.57%

30 bps

 Group 2 loans / Gross loans  

2.59%

1.44%

-115 bps

2.59%

1.44%

-115 bps

 Accrued interest / IEAs  

0.74%

0.61%

-13 bps

0.74%

0.61%

-13 bps

Source: CTG, Vietcap — *CASA volume included demand deposits and margin deposits; ** Q2 2023 and Q2 2024 loan and deposit growth is QoQ growth; H1 2023 and H1 2024 loan and deposit growth is 6M growth.

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