VPB – Strong growth momentum to continue in 2025

Overall, 2024 profit tracked slightly ahead of our expectation due to due to lower-than-expected operating expenses, and the recovery of FEC and the QoQ improvement in consolidated bad debt metrics were better than we anticipated. Management’s presentation indicates a positive outlook in 2025 for VPB’s growth and containing asset quality despite pressure on funding costs. Additionally, uncertainties from the global economy should be monitored closely. We see potential upside to our 2025F earnings forecast for VPB due to its strong growth engines and better profit contribution from FE Credit.

Key takeaways from the meeting are as follows:

1. Business environment outlook:

Robust GDP growth in 2024 but retail sales recovered slower vs other areas. The bank expects a similar pattern in 2025.
Real estate (RE) sector: Stronger credit for RE business vs consumption in 2024 and liquidity is gradually recovering but financial risks and housing pricing risks persist.
VPB’s forecasts: Inflation 4%-5%; system-wide deposit growth 11%-12%; system-wide credit growth 15%-16%; 10Y Gov bond yield to increase by 24 bps-44 bps; 12M deposit rates to rise 30 bps-70 bps. The FDI segment will remain strong and real estate recovery should continue with Government support.

2. 2025F targets for parent bank:

Credit growth: 20%-25%.
Deposit growth: 30%. VPB targets to improve LDR in 2025 (2024 LDR at 81.6% vs the regulatory cap of 85%). Key funding growth drivers: (1) attracting more customer deposits via enhancing partnership channels (i.e. MWG) and providing settlement services, (2) launching a new certificate deposit product, and (3) diversifying funding sources (i.e. domestic interbank market and offshore funding).
NIM to be flat YoY amid upward pressure on funding costs and loan pricing competition to gain market share.
NPL ratio targeted to be flat YoY (controlled below 3%; 2024 was 2.47%)
Credit costs net recoveries decrease to below 2% (vs 2.59% in 2024).
CIR could increase to around 25% (vs 21.7% in 2024) due to investment in technology. This is still at a low level vs peers.

3. Others:

VPB’s strategy in the RE segment: VPB’s credit to real estate has been strong as the bank assesses the recovery of the RE segment is essential to economic growth. Per VPB, the bank focuses on affordable housing in northern Vietnam, where recovery is stronger with selective projects. Other potential segments include industrial parks (strong FDI inflows) and social housing (per Government directives).
FE Credit: Q4 2024 was the first quarter that FEC grew its loan book in the last two years. 2024 total new disbursement increased 40% YoY. Consumer durable loans improved significantly due to a more extensive partnership with MWG. FEC recorded a bottom-line of VND500bn in 2024 after making losses in 2022-2023 due to resuming disbursements, improving funding costs, credits costs, and improving debt collection. Management targets 15% credit growth in 2025 (vs 10% in 2024) and FEC’s funding costs to ease YoY.
GPBank: VPB is supporting GPBank in terms of management, IT, and enhancing its business model. Preferential treatment from the Goverment includes exemption from consolidation and calculating the safety ratio, a preferential credit quota, and the potential of lifting the FOL to above 30%, which helps to bolster VPB’s long-term growth.