VCB - Weak NOII; reversal of provision expenses for interbank loans saves bottom line - Earnings Flash
  • 2024-07-31T00:00:00
  • Company Research

VCB released its H1 2024 results with TOI of VND34.0tn (USD1.4 bn; -5.4% YoY) and PBT of VND20.8tn (USD829 mn; +1.6% YoY), achieving 44% and 46% of our respective FY2024 forecasts. These results imply Q2 2024 PBT of VND10.1tn (-5.6% QoQ, +9.0% YoY). The H1 2024 YoY increase in the bottom line was mainly driven by a 33.7% YoY drop in provision expenses, which was offset by a 22.1% decrease in NOII. Overall, we see a slightly potential downside to our earnings forecasts for VCB, pending a fuller review.

  • 6M 2024 credit growth was 7.7% (loan growth of 7.8%; corporate bonds decreased 1.8% vs Q4 2023 and accounted for 0.7% of total credit) vs our full-year forecast of 12.0%.
  • 6M 2024 customer deposits declined 1.5% vs our full-year forecast of 11.5%. In Q2 2024, VCB’s CASA ratio increased by 0.9 ppts QoQ and 5.6 ppts YoY to 35.6%, which we attribute to the deposit rates offered by the bank not increasing in H1 2024.
  • H1 2024 NIM decreased 27 bps YoY to 3.02% vs our full-year forecast of 3.12%, which we attribute to a 152 bps YoY decrease in the IEA yield that outweighed a 140 bps YoY drop in COF. Q2 2024 NIM contracted by 12 bps QoQ to 3.04%.
  • H1 2024 NOII was VND6.0tn (-22.1% YoY), completing 34% of our full-year forecast. The YoY decline was driven by all activities, including (1) a 4.5% fall in NFI, (2) a 26.0% decrease in FX trading gains (from a high base in H1 2023), (3) a 75.8% decrease in bond trading gains, and (4) a 60.3% decrease in net other income (mainly including recovery income of written-off bad debt).
  • H1 2024 CIR declined 0.5 ppts YoY to 29.9% vs our full-year forecast of 32.4%.
  • Asset quality deteriorated YoY but remained flat QoQ with the NPL ratio at 1.20% in Q2 2024 vs our full-year forecast of 0.9%. New NPL formation in Q2 22024 was VND2,468 bn (including a write off of VND1,481bn), accounting for 0.18% of VCB’s loan book. VCB’s Group 2 loan ratio decreased by 15 bps QoQ, reaching 0.41%.
  • Annualized H1 2024 credit cost was 0.44% (vs 0.59% in 2023). VCB’s H1 2024 provision expenses were VND3.0tn (-22.1% YoY), achieving 43% of our full-year forecast. VCB’s LLR was 212% in Q2 2024 vs 230% and 203% in 2023 and Q1 2024, respectively, and remained the highest in our coverage. Our estimation suggests that VCB reversed VND3.9tn of provision expenses for interbank loans in Q2 2024. In H1 2024, the bank reversed VND4.7 of provision expenses for interbank loans.

VCB’s consolidated H1 2024 results 

VND bn  

 H1 2023  

 H1 2024  

 YoY  

 Q2 2023  

 Q2 2024  

 YoY  

NII 

 28,224 

 27,986 

-0.8%

 14,021 

 13,908 

-0.8%

Non-interest income 

 7,764 

 6,046 

-22.1%

 3,450 

 2,844 

-17.6%

OPEX  

 (10,930)

 (10,176)

-6.9%

 (5,656)

 (5,122)

-9.4%

PPOP   

 25,057 

 23,856 

-4.8%

 11,814 

 11,630 

-1.6%

Provision expenses  

 (4,558)

 (3,022)

-33.7%

 (2,536)

 (1,514)

-40.3%

NPAT-MI   

 16,409 

 16,699 

1.8%

 7,428 

8,125

9.4%

  

 

 

 

 

 

 

Loan growth**  

2.9%

7.8%

5.0 ppts

0.3%

8.1%

7.8 ppts

Deposit growth**   

6.7%

-1.5%

-8.2 ppts

3.5%

2.0%

-1.5 ppts

  

 

 

 

 

 

 

 NIM  

3.28%

3.02%

-27 bps

3.19%

3.04%

-15 bps

Interest-earning asset yield     

6.57%

5.05%

-152 bps

6.56%

5.00%

-156 bps

Cost of funds  

3.68%

2.28%

-136 bps

3.78%

2.21%

-157 bps

CASA ratio*  

30.0%

35.6%

5.6 ppts

30.0%

35.6%

5.6 ppts

CASA ratio plus term deposits in FX     

35.8%

41.5%

5.7 ppts

35.8%

41.5%

5.7 ppts

CIR  

30.4%

29.9%

-0.5 ppts

32.4%

30.6%

-1.8 ppts

  

 

 

 

 

 

 

NPLs / Gross loans    

0.83%

1.20%

37 bps

0.83%

1.20%

37 bps

Group 2 loans / Gross loans      

0.69%

0.41%

-28 bps

0.69%

0.41%

-28 bps

Accrued interest / IEAs   

0.53%

0.45%

-8 bps

0.53%

0.45%

-8 bps

 Source: VCB, 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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