•We attended VPB’s AGM on April 18. The meeting’s main agenda was to propose (1) business guidance for 2024, (2) the dividend plan & ESOP, and (3) the international bond issuance plan. Other matters include approving (1) the limit for intercompany transactions with FEC at 35% charter capital (VND27.8tn – USD1.1bn), (2) the general plan for supporting a weak credit institution, (3) establishing a branch/representative office or other forms of commercial presence in Japan, and (4) electing one new BOD member from Sumitomo Mitsui Banking Corporation.

•2024 guidance includes credit growth of 25% YoY (the final growth figure is subject to the State Bank of Vietnam’s (SBV) decision regarding the allocation of the top-up quota), funding growth (including customer deposits and valuable papers) of 22% YoY, NPLs over credit exposure (gross loans plus corporate bonds) to be kept below 3%, and profit before tax (PBT) of VND23.2tn (USD928mn; +114% YoY) vs our forecast of VND16.8tn (USD68mn;+53% YoY). VPB’s current credit quota is more than 15%. 

•VPB proposed (1) a cash dividend of VND1,000/share (equivalent to a dividend yield of 5%) to be paid in Q2-Q3/2024 and (2) issuing 30mn ESOP shares at VND10,000/share (0.4% outstanding shares). Management expects stable annual cash dividends in 2022-2027 with a minimum payout ratio of 30%. 

•VPB proposed to issue USD400mn of five-year international bonds in 2024-Q1 2025 (non-convertible, unsecured, and non-warrant linked bonds). The proceeds will be used to finance green/ESG projects.

•Though FEC made a loss of nearly VND1tn in Q1 2024, VPB is confident about FEC’s turnaround story in H2 2024 to achieve its 2024F PBT guidance of VND1.2tn due to improving NIM and credit demand. The bank stated that FEC’s funding costs have been reduced to 6%-7% vs 9%-11% before 2022. Management projects that FEC’s PBT can achieve around VND3tn-4tn from 2025F onwards.   

•Given the current tightening bancassurance regulation and slow demand improvement, VPB hardly expects any growth in bancassurance sales for life insurance. 

•Two new BOD members are: Mr. Takeshi Kimoto (from Sumitomo Mitsui Banking Corporation (SMBC)) and Ms. Pham Thi Nhung (Deputy CEO representing a group of shareholders holding 19.72% of VPB’s stake).

•We currently have a BUY rating for VPB with a target price of VND24,000/share. 

VPB expects stronger improvement in bad debt metrics in H2 2024.  The bank stated that the main drivers of NPL formation since last year have been real estate businesses, mortgages (especially for unfinished projects), lower-mass retail, and SME. The current contribution of credit to real estate businesses and mortgages of VPB are 19% and 16%, respectively. Management expects a stronger recovery of the real estate market in H2 2024 and 2025 given the Government’s support and the improvement in both supply and demand. Additionally, real estate remains one of VPB’s key credit segments.  

Loan book to be more diversified rather than solely focusing retail & SME. Management stated that SMBC has helped both the parent bank and FEC in terms of enhancing governance and risk management, international compliance capability, and diversifying funding sources. Additionally, with SMBC’s strategic support, VPB will make FDI customers become one of its key business segments in the next few years. 

Supporting a weak bank to help VPB achieve growth opportunities. The charter capital of the weak bank shall not exceed 5% of VPB’s charter capital and be less than VND5tn. VPB believes it has a good capacity to support the weak bank given this size. Additionally, the bank expects the benefits from this project should help VPB to expand its network faster, leverage its growth (i.e., preferential credit quota, increase FOL to more than 30%, etc).

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