VPB – Weaker-than-expected top line growth; bad debt metrics remain high

VPB released its 2023 results with consolidated PBT of VND11.0tn (USD452mn; -48.2% YoY) vs the parent bank’s PBT of VND13.5tn, which achieves 84% of our full-year forecast. This implies Q4 2023 consolidated PBT of VND2.7tn (-13.1% QoQ). Overall, the bottom line tracked behind our forecasts due to weaker-than-expected top-line growth. Additionally, we estimate that FEC could have recorded Q4 2023 PBT of around more than VND150bn after breaking even in Q3 2023. We see potential downside risks to our earnings forecasts, pending a more extensive review.

The parent bank’s 2023 credit growth (including customer loans and corporate bonds) was 31.8% with 2023 loan growth of 37.3%. As of Q4 2023, the corporate bond balance at the parent bank decreased 28.2% vs 2022 to VND23.6tn (USD1bn; -16.2% QoQ), accounting for 4.5% of the total credit balance. We note that in Q4 2023, VPB downgraded around VND9.9tn and VND300bn of available-for-sale securities from Group 1 to Group 2 and Group 3, respectively. We believe most of these securities could come from corporate bonds issued by non-bank companies, especially real estate developers.
Our observations suggest that credit to real estate businesses increased from VND52.0tn (14.4% of the parent’s loan book) in Q4 2022 to VND97.0tn (19.5% of the parent’s loan book) in 2023. We estimate that additional credit to real estate businesses and additional credit to retail & SMEs accounted for approximately 33% of the increase in the 2023 loan book, for each segment.
2023 consolidated deposit growth was 45.9%, which was driven by retail customer deposits. In addition, VPB’s Q4 2023 consolidated CASA ratio was 17.4% (flat YoY & QoQ).
2023 consolidated NIM was 5.62% (-188 bps YoY), which was lower than our full-year forecast of 5.85% and which we attribute mainly to higher-than-expected credit growth in late 2023 that distorted the IEA yield. The consolidated NIM for Q4 2023 was 5.87% (+91 bps QoQ).
2023 consolidated NFI was VND7.1tn (+10.2% YoY) and achieves 99% of our full-year forecast due to strong fee income from settlement services and other non-credit activities. However, 2023 NOII tracked slightly behind our expectation due to higher-than-expected losses from FX trading activity and weak recovery income from written-off bad debts at FEC.
2023 CIR was 28.0% (vs 2022 CIR of 27.0% if we exclude one-off income from bancassurance). 2023 OPEX was in line with our expectations.
Consolidated bad debt metrics continued to improve but remained high. 2023 consolidated NPL ratio was 5.01% (-73 bps QoQ) and Group 2 loans to gross loans was 6.89% (-114 bps QoQ). In addition, 2023 consolidated write-offs to gross loans were relatively flat YoY at 4.21%.
VPB recorded VAMC bond balances for the first time since 2018. As of Q4 2023, VPB recorded VAMC bond balances of VND4.3tn (0.5% of total assets) amid high bad debt ratios.
We estimate that FEC’s 2023 loan book was relatively flat QoQ and decreased 14.6% YoY. Meanwhile, FEC’s bad debt metrics were also flat QoQ, which signals remaining high pressure on credit costs.
2023 credit cost was 4.4% (vs 5.1% in 2022). The Q4 2023 LLR increased 9 ppts to 51.7% (vs 54.4% in 2022).
VPB achieved the top CAR ratio in our coverage at more than 17% (consolidated level) with ample liquidity. 2023 LDR was 79.6% and short-term funding to medium and long-term lending was 25.3%.

Figure 1: VPB’s consolidated 2023 results

VND bn	2022	2023	YoY	Q4 2022	Q4 2023	YoY
NII	41,021	38,175	-6.9%	10,283	11,042	7.4%
Non-interest income	16,776	11,569	-31.0%	2,485	2,299	-7.5%
OPEX	(14,116)	(13,912)	-1.4%	(4,065)	(3,615)	-11.1%
PPOP	43,681	35,832	-18.0%	8,703	9,726	11.8%
Provision expenses	(22,461)	(24,844)	10.6%	(7,320)	(7,018)	-4.1%
NPAT-MI	18,175	10,053	-44.7%	1,140	2,111	85.1%

Loan growth**	23.4%	29.2%	5.8 ppts	8.9%	8.6%	-0.3 ppts
Deposit growth**	25.4%	45.9%	20.6 ppts	9.3%	5.0%	-4.3 ppts

NIM	7.50%	5.62%	-188 bps	7.24%	5.87%	-138 bps
Interest-earning asset yield	11.37%	11.27%	-11 bps	11.73%	10.85%	-88 bps
Cost of funds	4.48%	6.65%	217 bps	5.17%	5.81%	64 bps
CASA ratio*	17.7%	17.4%	-0.3 ppts	17.7%	17.4%	-0.3 ppts
CASA ratio plus term deposits in FX	18.5%	17.6%	-0.8 ppts	18.5%	17.6%	-0.8 ppts
CIR	24.4%	28.0%	3.5 ppts	31.8%	27.1%	-4.7 ppts

NPLs / Gross loans	5.73%	5.01%	-73 bps	5.73%	5.01%	-73 bps
Group 2 loans / Gross loans	5.44%	6.89%	145 bps	5.44%	6.89%	145 bps
Accrued interest / IEAs	1.34%	1.16%	-18 bps	1.34%	1.16%	-18 bps

Source: VPB, Vietcap — *CASA volume included demand deposits and margin deposits; ** Q4 2022 and Q4 2023 loan and deposit growth is QoQ growth; 2022 and 2023 loan and deposit growth is YoY growth.

Figure 2: VPB’s standalone 2023 results

VND bn	2022	2023	YoY	Q4 2022	Q4 2023	YoY
NII	25,606	26,390	3.1%	6,723	7,835	16.5%
Non-interest income	14,985	8,771	-41.5%	2,288	1,936	-15.4%
OPEX	(7,843)	(9,185)	17.1%	(2,317)	(2,450)	5.7%
PPOP	32,749	25,977	-20.7%	6,693	7,321	9.4%
Provision expenses	(8,744)	(12,509)	43.1%	(2,677)	(4,826)	80.3%
NPAT-MI	19,209	10,766	-44.0%	3,211	1,987	-38.1%

Loan growth**	29.2%	37.3%	8.0 ppts	12.6%	9.3%	-3.3 ppts
Deposit growth**	28.5%	44.4%	15.9 ppts	11.1%	5.0%	-6.1 ppts

NIM	5.24%	4.18%	-106 bps	5.25%	4.45%	-80 bps
Interest-earning asset yield	8.93%	9.68%	75 bps	9.64%	9.35%	-29 bps
Cost of funds	4.18%	6.36%	218 bps	4.93%	5.61%	68 bps
CASA ratio*	19.2%	17.9%	-1.3 ppts	19.2%	17.9%	-1.3 ppts
CASA ratio plus term deposits in FX	19.9%	18.0%	-1.9 ppts	19.9%	18.0%	-1.9 ppts
CIR	19.3%	26.1%	6.8 ppts	25.7%	25.1%	-0.6 ppts

NPLs / Gross loans	2.80%	3.20%	40 bps	2.80%	3.20%	40 bps
Group 2 loans / Gross loans	4.06%	6.19%	213 bps	4.06%	6.19%	213 bps
Accrued interest / IEAs	1.35%	1.10%	-25 bps	1.35%	1.10%	-25 bps

Source: VPB, Vietcap — *CASA volume included demand deposits and margin deposits; ** Q4 2022 and Q4 2023 loan and deposit growth is QoQ growth; 2022 and 2023 loan and deposit growth is YoY growth.