BID – Provisions for credit losses are controlled and will support profit before tax

• In Q2, total operating income decreased slightly by 4% YoY. However, effective control for provision for credit losses has been the driving force behind BID's PBT maintaining a growth rate of 6% YoY.
• The cost of funds (annualized) in Q2 increased at a slower pace, rising by 45 bps (compared to an increase of 81 bps in Q1). Meanwhile, lending rates experienced delay in rate adjustments, with the average rate increasing by 17 bps, resulting in a 36 bps increase in yield on earning assets). The gap in the rate increases between these two components narrowed, leading to a 3 bps decrease in BID's NIM compared to the previous quarter, reaching 2.64% in Q2 2023. Additionally, allocating a higher proportion to high-yield loans in the total interest-earning assets positively contributed to NIM, offsetting the relatively low yields on bond investments.
• With a higher credit granted in the latter half of 2023 and the advantage in mobilization, which helps improve NIM, we project that credit growth for 2023 will reach 12.8%, driving net interest income to VND 63.9 trillion (+14% YoY) and total operating income to VND 76.4 trillion (+9.9%). The expected credit cost of 1.4% is anticipated to enable the company to maintain the PBT at VND 27.6 trillion (+20% YoY). We expect BID's ROE to improve above 20% and additional equity capital to provide a basis for maintaining high credit growth in the coming years.
• Our target price is VND 54,200 per share, equivalent to a PBR of 2.3, with a return of 19% compared to the closing price on August 21, 2023. Therefore, we recommend to BUY BID.