CTG – Strong recovery from written-off bad debts; credit cost remains high – Earnings Flash
  • 2024-10-31T00:00:00
  • Company Research

CTG released its 9M 2024 results with TOI of VND60.6tn (USD2.4bn; +16% YoY) and PBT of VND19.5tn (USD780mn; +12% YoY), fulfilling 72% and 68% of our FY2024 forecasts, respectively. This implies Q3 2024 PBT of VND6.6tn (-3% QoQ; +34% YoY). Overall, CTG’s 9M 2024 earnings were broadly in line with our forecasts given our expectation for provision expenses to ease in Q4 2024 and the potential continued strong recovery from written-off bad debts. We see no major risk to our current earnings forecast, pending a more extensive review.  

  • 9M 2024 credit growth was 9.0% (loan growth of 9.0%; corporate bonds increased 6.2% vs Q4 2023 and accounted for 0.3% of the credit balance) 

  • 9M 2024 customer deposit growth was 7.5%. The Q3 2024 CASA ratio was roughly flat QoQ at 23.1%. 

  • 9M 2024 NIM slightly increased by 7 bps YoY to 2.95% vs our full-year forecast of 3.04%. The YoY increase in NIM was mostly driven by a 171-bp YoY decrease in funding costs given a 3.1-ppt YoY improvement in the CASA ratio. Q3 2024 NIM slightly decreased by 7 bps to 2.89% due to QoQ lower IEA yield9M 2024 NII completes 73% of our full-year forecast and was in line with our expectation.   

  • 9M 2024 NOII was VND14.5tn (+6% YoY), completing 70% of our full-year forecast given (1) weak gains from trading and investment securities in Q3 and (2) our expectation for CTG to continue recording recovery income from written-off bad debts in Q4 2024. However, on a quarterly basis, Q3 2024 NOII still increased 47% QoQ, which was supported by a 264% QoQ increase in net other income (mainly comprised of recovery from written-off bad debts). 

  • 9M 2024 CIR edged down by 0.7ppts YoY to 26.4% vs our full-year forecast of 28.0%. We expect some seasonal expenses in Q4 2024 to increase the full-year CIR.  

  • On a quarterly basis, the NPL ratio decreased, but the Group 2 loans level was relatively flat. The Q3 2024 NPL ratio decreased 12 bps QoQ to 1.45% vs our 2024F forecast of 1.25%. Q3 2024 Group 4 loans decreased 45% QoQ (VND6.1tn) given that a client in Group 4 was reverted to Group 1 after passing payment probation in July, according to the bank. However, Q3 2024 Group 3 loans increased nearly 3x (VND6.5tn) QoQ, which we believe has created pressure on the bank’s credit costs.   

  • 9M 2024 annualized credit costs spiked to 2.2% vs the average credit costs of 1.73% in 2021-2023. 9M 2024 provision expenses increased 22% YoY, completing 79% of our full-year forecast. CTG’s Q3 2024 LLR surged QoQ and remained at the high end compared to peers at 153% (+39 ppts QoQ; -19 ppts YoY).  

 

CTG’s consolidated 9M 2024 results 

VND bn  

 9M 2023  

 9M 2024  

 YoY  

 Q3 2023  

 Q3 2024  

 YoY  

 NII  

 38,511  

 46,091  

19.7% 

 13,087  

 15,578  

19.0% 

 Non-interest income  

 13,672  

 14,533  

6.3% 

 4,306  

 6,339  

47.2% 

 OPEX  

 (14,139) 

 (15,976) 

13.0% 

 (5,082) 

 (6,095) 

19.9% 

 PPOP   

 38,044  

 44,647  

17.4% 

 12,311  

 15,821  

28.5% 

 Provision expenses  

 (20,642) 

 (25,135) 

21.8% 

 (7,440) 

 (9,269) 

24.6% 

 NPAT-MI   

 13,873  

 15,550  

12.1% 

 3,863  

 5,226  

35.3% 

  

 

 

 

 

 

 

 Loan growth**  

8.7% 

9.0% 

0.3 ppts 

2.0% 

2.2% 

0.2 ppts 

 Deposit growth**   

4.9% 

7.5% 

2.6 ppts 

0.0% 

3.4% 

3.4 ppts 

  

 

 

 

 

 

 

 NIM  

2.88% 

2.95% 

7 bps 

2.87% 

2.89% 

2 bps 

 Interest-earning asset yield  

7.45% 

5.88% 

-157 bps 

7.20% 

5.74% 

-146 bps 

 Cost of funds  

4.85% 

3.14% 

-171 bps 

4.64% 

3.05% 

-159 bps 

 CASA ratio*  

20.0% 

23.1% 

3.1 ppts 

20.0% 

23.1% 

3.1 ppts 

 CASA ratio plus term deposits in FX     

22.9% 

25.6% 

2.7 ppts 

22.9% 

25.6% 

2.7 ppts 

 CIR  

27.1% 

26.4% 

-0.7 ppts 

29.2% 

27.8% 

-1.4 ppts 

  

 

 

 

 

 

 

 NPLs / Gross loans    

1.37% 

1.45% 

8 bps 

1.37% 

1.45% 

8 bps 

 Group 2 loans / Gross loans   

2.37% 

1.44% 

-93 bps 

2.37% 

1.44% 

-93 bps 

 Accrued interest / IEAs   

0.69% 

0.58% 

-11 bps 

0.69% 

0.58% 

-11 bps 

Source: CTG, Vietcap — *CASA volume included demand deposits and margin deposits; ** Q3 2023 and Q3 2024 loan and deposit growth is QoQ growth; 9M 2023 and 9M 2024 loan and deposit growth is 9M growth. 

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