LPB released Q1 2023 results with TOI of VND3.1tn (USD133mn; -3.9% YoY) and bottom-line net profit of VND1.2tn (USD53mn; -12.5% YoY), achieving 20% and 24% of our FY2023 forecasts, respectively. The YoY decrease in NPAT was mainly due to (1) a 3.5% YoY decrease in NII, (2) 6.5% YoY decrease in NOII and (3) 16.6% increase in OPEX. These factors were partly offset by a 28.2% YoY decrease in provision expenses. We see no material changes to our earnings forecasts for LPB, pending a more extensive review.

NIM dropped due to a spike in funding cost. We attribute the YoY decrease in NII mainly to a 70-bp YoY contraction in NIM. This was primarily driven by (1) a 206-bp YoY increase in COF that outweighed (2) 106-bp YoY increase in IEA yield. On a QoQ basis, Q1 2023 NIM decreased 12 bps QoQ mainly due to a 103-bp QoQ increase in COF. We attribute the YoY spike in COF to (1) the decrease in the CASA ratio and (2) reduction in the contribution of interbank balances in total funding from around 16% on average in 2022 to 9% in Q1 2023. We note that the interbank rate remained low in the first nine months of 2022 before surging in Q4 2022. Additionally, LPB has not had corporate bond exposure since Q2 2022.