VPB - NIM improvement continues; FEC turns profitable

VPB released its H1 2024 results with consolidated PBT of VND8.7tn (USD341mn; +68% YoY), achieving 51% of our full-year forecast. Q2 2024 consolidated PBT was VND4.5tn (+7% QoQ; +72% YoY). Overall, profit tracked slightly ahead of our expectation due to lower-than-expected operating expenses. We see potential upside to our current forecasts, pending a more extensive review.

The parent bank’s H1 2024 credit growth was 8.4% (loan growth of 11.2%). As of Q2 2024, the corporate bond balance at the parent bank decreased 51% vs 2023 and accounted for 2.0% of the total credit balance.
H1 2024 consolidated deposit growth was 6.6%. The Q2 2024 CASA ratio was 17.9% (+3.5 ppts QoQ; +3.0 ppts YoY).
H1 2024 consolidated NIM was 5.90% (+39 bps YoY) vs our full-year forecast of 6.05%. Q2 2024 consolidated NIM was 6.17% (+36 bps QoQ; +89 bps YoY). The QoQ improvement in NIM was driven by (1) a 60-bp QoQ decrease in funding costs given that most of the deposits raised in 2023 have been rolled foward to lower yields, and (2) stronger credit growth vs deposit growth. Additionally, VPB’s Q2 2024 LDR and short-term funding to medium and long-term lending were 81.1% and 23.5%, respectively.
VPB cleared all of its VAMC bond balances of VND4.3tn in Q2 2024, which is earlier than our expectation in 2026F. We recall that VPB recorded VAMC bonds in Q4 2023 for the first time since 2018 amid high bad debt ratios.
H1 2024 NOII decreased 15% YoY and tracked in line with our expectation. Q2 2024 NOII of VND3.7tn surged 78% QoQ mainly due to (1) a 21% QoQ increase in pure NFI and (2) strong gains from investment securites of VND411bn in Q2 2024.
H1 2024 CIR of 23.0% was among the low-end in our coverage and OPEX was much lower than our expectation (completing 39% of our full-year forecast), which was partly driven by an 11% YoY decrease in employee expenses.
On a QoQ basis, the NPL ratio ticked up, but the Group 2 loans level decreased. The Q2 2024 consolidated NPL ratio was 5.08% (+24 bps QoQ; -144 bps YoY). Group 2 loans to gross loans were 7.83% (-48 bps QoQ; -37 bps YoY).
We estimate that FEC’s Q2 2024 loan book was relatively flat in the last two quarters at around VND62tn (USD244mn; contributed around 10% to VPB’s Q2 2024 consolidated loan book). VPB stated that FEC’s disbursement activities have bounced back since Q1 2024 with H1 2024 disbursement volume increasing 53% YoY and Q2 2024 disbursement volume increasing 9% QoQ. We estimate that FEC’s Q2 2024 NPL ratio was relatively flat QoQ and remained at a relatively high level (around 20%), which signals persisting high pressure on credit costs. Additionally, we estimate that FEC could have generated around more than VND100bn of profit in Q2 2024, which is in line with our expectation.
H1 2024 provision expenses increased 9.3% and completed 50% of our full-year forecast. However, VPB’s current bad debt metrics indicate to us potential upward pressure on credit costs in coming quarters. Q2 2024 consolidated LLR was 48.1% (-5.4 ppts QoQ; +5.1 ppts YoY).

Figure 1: VPB’s consolidated H1 2024 results

VND bn	H1 2023	H1 2024	YoY	Q2 2023	Q2 2024	YoY
NII	18,296	23,732	29.7%	8,762	12,408	41.6%
Non-interest income	6,844	5,807	-15.2%	4,019	3,720	-7.5%
OPEX	(7,102)	(6,798)	-4.3%	(3,679)	(3,331)	-9.4%
PPOP	18,039	22,741	26.1%	9,103	12,797	40.6%
Provision expenses	(12,876)	(14,076)	9.3%	(6,490)	(8,313)	28.1%
NPAT-MI	5,598	6,424	14.8%	2,452	3,633	48.1%

Loan growth**	11.5%	10.2%	-1.2 ppts	5.4%	7.1%	1.7 ppts
Deposit growth**	27.9%	6.6%	-21.3 ppts	17.0%	3.4%	-13.6 ppts

NIM	5.51%	5.90%	39 bps	5.27%	6.17%	89 bps
Interest-earning asset yield	11.07%	9.72%	-136 bps	11.30%	9.82%	-148 bps
Cost of funds	6.34%	4.52%	-182 bps	6.86%	4.32%	-253 bps
CASA ratio*	15.0%	17.9%	3.0 ppts	15.0%	17.9%	3.0 ppts
CASA ratio plus term deposits in FX	15.2%	18.3%	3.0 ppts	15.2%	18.3%	3.0 ppts
CIR	28.2%	23.0%	-5.2 ppts	28.8%	20.7%	-8.1 ppts

NPLs / Gross loans	6.52%	5.08%	-144 bps	6.52%	5.08%	-144 bps
Group 2 loans / Gross loans	8.19%	7.83%	-37 bps	8.19%	7.83%	-37 bps
Accrued interest / IEAs	1.08%	1.03%	-5 bps	1.08%	1.03%	-5 bps

Source: VPB, 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: VPB’s standalone H1 2024 results

VND bn	H1 2023	H1 2024	YoY	Q2 2023	Q2 2024	YoY
NII	12,501	17,251	38.0%	5,922	9,029	52.5%
Non-interest income	4,984	4,277	-14.2%	3,022	2,534	-16.1%
OPEX	(4,666)	(5,070)	8.7%	(2,670)	(2,650)	-0.7%
PPOP	12,819	16,459	28.4%	6,274	9,052	44.3%
Provision expenses	(4,922)	(7,966)	61.8%	(2,492)	(5,479)	119.8%
NPAT-MI	6,317	6,822	8.0%	3,025	2,886	-4.6%

Loan growth**	15.5%	11.2%	-4.2 ppts	5.7%	8.0%	2.3 ppts
Deposit growth**	26.2%	6.6%	-19.6 ppts	17.0%	3.5%	-13.5 ppts

NIM	4.08%	4.57%	49 bps	3.87%	4.78%	91 bps
Interest-earning asset yield	9.49%	8.28%	-122 bps	9.78%	8.32%	-145 bps
Cost of funds	6.04%	4.32%	-172 bps	6.60%	4.12%	-248 bps
CASA ratio*	15.2%	18.2%	3.1 ppts	15.2%	18.2%	3.1 ppts
CASA ratio plus term deposits in FX	15.4%	18.5%	3.1 ppts	15.4%	18.5%	3.1 ppts
CIR	26.7%	23.5%	-3.1 ppts	29.9%	22.6%	-7.2 ppts

NPLs / Gross loans	3.88%	3.31%	-57 bps	3.88%	3.31%	-57 bps
Group 2 loans / Gross loans	7.84%	7.98%	14 bps	7.84%	7.98%	14 bps
Accrued interest / IEAs	1.04%	0.97%	-7 bps	1.04%	0.97%	-7 bps