HDB – Strong NII, low credit costs support profit growth – Earnings Flash
  • 2024-07-30T00:00:00
  • Company Research

HDB released its H1 2024 consolidated results with PBT of VND8.2tn (USD321mn; +49% YoY), achieving 51% of our FY2024 and tracking slightly ahead of our expectation mostly due to slightly lower-than-expected provision expenses and strong NII. This implies Q2 2024 PBT of VND4.1tn (+3% QoQ; +51% YoY). We see potential upside to our current earnings forecasts, pending a more extensive review.

  • The parent bank’s H1 2024 credit growth was 13.3% (loan growth of 12.8% and corporate bond growth of 30.3%). As of Q2 2024, corporate bonds accounted for 3.4% of HDB’s total credit exposure. The breakdown of new disbursements to some major segments is as follows: 25% to construction; 6% to real estate; 5% to manufacturing, processing; 30% to wholesale and retail trades; 12% to hospitality services; 12% to financial services. Additionally, credit to real estate businesses accounted for 16% of the parent bank’s Q2 2024 loan book. 
  • According to our estimation, HDS’s loan book increased 5.3% in H1 2024 to VND16.9tn (USD668mn; +1.1% QoQ) — with its loan book contributing 4% to the consolidated loan book. HDS’s Q2 2024 NPL ratio was 7.51% (-4 bps QoQ; -41 bps YoY). 
  • H1 2024 consolidated deposit growth was 4.3% (2023 deposit growth was abnormally high at 71.8% YoY). The Q2 2024 CASA ratio improved 1.4 ppts QoQ to 9.9%.
  • H1 2024 consolidated NIM was 5.39% (+83 bps YoY), which was higher than our full-year forecast of 5.21%. Q2 2024 consolidated NIM was 5.59% (+32 bps QoQ), which was mainly supported by a significant improvement in funding costs from a high base in previous quarters.  
  • H1 2024 NOII of VND1.2tn (-49% YoY) tracked behind our expectation (completing 37% of our full-year forecast) due to weak performance in both fee income and losses from trading/investment activities.  
  • Asset quality continued improving QoQ. The Q2 2024 consolidated NPL ratio and Group 2 loans levels were 2.10% (-14 bps QoQ; -5 bps YoY) and 4.50% (-22 bps QoQ; -55 bps YoY), respectively. The Q2 2024 consolidated LLR was 58.8% (+ 2.2 ppts QoQ; -2.5 ppts YoY). 
  • H1 2024 provision expenses of VND2.4tn (flat YoY) completed 37% of our full-year forecast and tracked behind our expectation. Despite a QoQ improvement in bad debt metrics, we expect upward pressure on HDB’s provision expenses to remain in coming quarters given (1) the remaining high Group 2 loans level and (2) our expectation for HDB to moderately increase its provisioning buffer.  

Figure 1: HDB’s consolidated H1 2024 results

VND bn 

 H1 2023 

 H1 2024 

 YoY 

 Q2 2023 

 Q2 2024 

 YoY 

 NII 

 9,795 

 14,880 

51.9%

 4,955 

 7,720 

55.8%

 Non-interest income 

 2,275 

 1,165 

-48.8%

 1,459 

 573 

-60.7%

 OPEX 

 (4,197)

 (5,484)

30.7%

 (2,239)

 (3,030)

35.3%

 PPOP  

 7,874 

 10,561 

34.1%

 4,175 

 5,263 

26.1%

 Provision expenses 

 (2,389)

 (2,396)

0.3%

 (1,433)

 (1,126)

-21.4%

 NPAT-MI     

 4,247 

 6,225 

46.6%

 2,159 

 3,115 

44.3%

 

 

 

 

 

 

 

 Loan growth** 

8.9%

12.5%

3.6 ppts

-0.4%

6.3%

6.7 ppts

 Deposit growth**  

43.5%

4.3%

-39.2 ppts

24.0%

2.1%

-21.9 ppts

 

 

 

 

 

 

 

 NIM 

4.56%

5.39%

83 bps

4.62%

5.59%

98 bps

 Interest-earning asset yield 

11.04%

10.37%

-67 bps

11.81%

10.32%

-149 bps

 Cost of funds 

6.65%

5.05%

-159 bps

7.38%

4.80%

-258 bps

 CASA ratio* 

7.4%

9.9%

2.5 ppts

7.4%

9.9%

2.5 ppts

 CASA ratio plus term deposits in FX    

7.5%

10.0%

2.4 ppts

7.5%

10.0%

2.4 ppts

 CIR 

34.8%

34.2%

-0.6 ppts

34.9%

36.5%

1.6 ppts

 

 

 

 

 

 

 

 NPLs / Gross loans   

2.15%

2.10%

-5 bps

2.15%

2.10%

-5 bps

 Group 2 loans / Gross loans  

5.04%

4.50%

-55 bps

5.04%

4.50%

-55 bps

 Accrued interest / IEAs  

1.24%

1.29%

4 bps

1.24%

1.29%

4 bps

Source: HDB, 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.

Figure 2: HDB’s standalone H1 2024 results

VND bn 

 H1 2023 

 H1 2024 

 YoY 

 Q2 2023 

 Q2 2024 

 YoY 

 NII 

 7,370 

 12,242 

66.1%

 3,723 

 6,379 

71.3%

 Non-interest income 

 2,127 

 539 

-74.7%

 1,225 

 234 

-80.9%

 OPEX 

 (3,100)

 (4,328)

39.6%

 (1,699)

 (2,445)

43.9%

 PPOP  

 6,397 

 8,452 

32.1%

 3,248 

 4,169 

28.3%

 Provision expenses 

 (849)

 (888)

4.6%

 (558)

 (374)

-33.0%

 NPAT-MI     

 4,498 

 5,984 

33.1%

 2,139 

 2,978 

39.2%

 

 

 

 

 

 

 

 Loan growth** 

10.0%

12.8%

2.8 ppts

-0.5%

6.5%

7.0 ppts

 Deposit growth**  

43.5%

4.3%

-39.2 ppts

24.0%

2.0%

-21.9 ppts

 

 

 

 

 

 

 

 NIM 

3.53%

4.53%

100 bps

3.56%

4.72%

115 bps

 Interest-earning asset yield 

10.03%

9.48%

-55 bps

10.79%

9.42%

-137 bps

 Cost of funds 

6.63%

5.00%

-163 bps

7.36%

4.75%

-262 bps

 CASA ratio* 

7.4%

9.9%

2.5 ppts

7.4%

9.9%

2.5 ppts

 CASA ratio plus term deposits in FX    

7.5%

10.0%

2.4 ppts

7.5%

10.0%

2.4 ppts

 CIR 

32.6%

33.9%

1.2 ppts

34.3%

37.0%

2.6 ppts

 

 

 

 

 

 

 

 NPLs / Gross loans   

1.82%

1.85%

3 bps

1.82%

1.85%

3 bps

 Group 2 loans / Gross loans  

4.76%

4.29%

-47 bps

4.76%

4.29%

-47 bps

 Accrued interest / IEAs  

1.24%

1.25%

1 bps

1.24%

1.25%

1 bps

Source: HDB, 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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