VIB released H1 2023 results with PPOP of VND7.2tn (USD305mn; +24% YoY) and NPAT-MI of VND4.5tn (USD192mn; +12.3% YoY), achieving 53% and 47% of our FY2023 forecasts, respectively. These results imply Q2 2023 PBT of VND3.0tn (+7.4% YoY & +9.4% QoQ). The YoY increase in the bottom line was mainly due to a 20.7% YoY increase in NII, which was partly offset by a 100.9% YoY increase in provision expenses. While the top line tracked ahead of our expectation, higher-than-peer NPL ratio and Group 2 loan ratio in Q2 2023 could imply continuing pressure on credit costs in H2 2023. 

- H1 2023 credit growth was 0.8% vs the current quota of 14.25%. 87% of VIB’s lending portfolio was comprised of retail customers, in which 53% were mortgages, 8% were auto loans, 8% were SME loans, and 11% were cards and other consumer loans. According to management, credit demand picked up in June 2023, and the bank expects to use its remaining quota in H2 2023 without lowering credit appraisal standards due to the positive impact from (1) lower interest rates and (2) recoveries in retail sales and tourism.  

- H1 2023 customer deposit growth was 2.6%. Additionally, interbank balances and offshore funding increased by 49% in H1 2023. As of Q2 2023, offshore funding accounted for 7% of VIB’s total funding. Management expects to increase the contribution of offshore funding to 10% in the long term as it believes offshore funding costs are still reasonable compared to raising domestic funding. VIB’s outstanding offshore funding was USD800mn as of Q2 2023; the bank expects to receive a further USD200mn in Q4 2023.    

- H1 2023 NIM of 4.94% (+38 bps YoY) was higher than our full-year forecast of 4.67% due to (1) a 252-bp YoY increase in the IEA yield that outweighed (2) a 33-bp YoY increase in funding cost. Q2 2023 NIM was 4.87% (-8 bps QoQ).

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