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BID – NPL are under control

• In Q3/23, BID's PBT was VND 5.9 trillion (-12% YoY). For the first 9 months of 2023, the accumulated pre-tax profit reached VND 19.7 trillion (+11% YoY), completing 78% of the bank's profit plan for 2023.
• During 9M2023, credit growth reached 8.3% YTD, a relatively high level compared to other state-owned banks. This growth was primarily driven by the customer loans, while the balance of corporate bonds recorded a 33% YTD decrease (contributing 0.5% to credit compared to 0.8% at the end of 2022). BID also showed an increase in the contribution ratio of retail customers, rising back to 44% after a slight decrease to 43% in Q2.
• The cost of funds (annualized) decreased by 32 bps in Q3, reflecting interest rate reductions across the entire system. Meanwhile, with a 33 bps decrease in asset yields, there was a slight decline in NIM by 2 bps compared to the Q2/2023 period. In the short term, the rapid and substantial reduction in deposit interest rates is seen as the most positive factor impacting NIM. This trend is expected to continue in Q4/2023, helping to stabilize NIM and complete the bottoming-out process.
• BID's asset quality remained stable, with the consolidated non-performing loan ratio for customer loans staying flat compared to the previous quarter at around 1.59%, and the group 2 loan ratio decreasing by 30 bps from the previous quarter.
• For Q4/2023, it is expected that total operating income will recover by 12% YoY, driven by the gradual recovery of credit growth towards the end of the year, reaching 12.5% YTD, and NIM (TTM) is expected to be maintained at 2.66%. In the medium term, BID is expected to maintain internal bad debt according to its set targets. Therefore, estimated provision expenses are expected to remain at a level equivalent to Q3/2023, around VND 5.6 trillion, to provide a basis for handling NPL in the final months of the year. The PBT for Q4/2023 is projected to reach VND 6.1 trillion (+14% YoY). The forecast for the whole year 2023 anticipates a PBT of VND 25.9 trillion (+12.5% YoY). The corresponding net profit after tax and earnings per share (EPS) are expected to be VND 20.4 trillion and VND 3,218, respectively. Our target price for BID is VND 43,500/share, equivalent to a target PBR of 2.1, providing a return of 5% compared to the closing price on December 15, 2023