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BID - Steady Growth Amid Capital Constraints and NPL Control

We issue an updated valuation report on BID shares of the JSC Bank for Investment and Development of Vietnam, with a 12-month target price of VND 50,100, equivalent to a projected 2026F P/B multiple of 1.8x.
• BID is Vietnam's largest state-owned commercial bank by total assets, exceeding VND 3.25 quadrillion (approximately USD 133 billion) as of end-2025. It benefits from a low cost of funds, a comprehensive financial services ecosystem, and an extensive nationwide distribution network. As a key policy bank aligned with directives from the Government and the State Bank of Vietnam (SBV), BIDV plays a pivotal role in credit allocation, capital mobilization, and support for priority economic sectors. We believe BID will serve as a cornerstone in achieving the Government's double-digit GDP growth target over the next five years by providing financing for major national projects, large conglomerates, and priority sectors.
• Forecast earnings growth remains steady, with gradual improvement in capital adequacy metrics. BIDV's capital adequacy ratio (CAR) and Tier 1 capital ratio stood at relatively low levels within the sector at 9.6% and 6.8%, respectively, as of 2Q25, primarily due to its high leverage ratio compared to peers. Stricter capital requirements under Circular 14/2025/TT-NHNN (effective September 15, 2025, aligning closer to Basel III standards) necessitate prompt capital-raising initiatives, combined with more prudent credit growth and risk-weighted asset management. Accordingly, we forecast credit growth at a CAGR of 14% over 2025F–2030F, below the projected system-wide average of 18% for the same period. Net interest margin (NIM) is expected to expand modestly from a low of 2.1% in 2025E (the lowest since listing) to 2.5% by end-2030F, driven by an improved proportion of medium- to long-term lending and a higher CASA ratio. Average NIM over 2025F–2030F is projected at 2.3%, still below the 2.6% average recorded in 2019–2024, underscoring BIDV's role in delivering preferential-rate credit packages to support national economic growth objectives. Net profit after tax is forecasted to achieve a CAGR of 15% over 2025F–2030F, including 14% growth in 2025E.
• Valuation and Recommendation. The strong share price rally of over 30% in the first two weeks of 2026 has largely absorbed the upside potential we previously anticipated over the next 12 months, bringing the current valuation in line with BIDV's five-year historical average and above our target multiple of 1.9x. In the near term, we recommend investors exercise patience and await a pullback to a more attractive discount relative to our target price, consistent with their risk tolerance, before accumulating shares. Over the longer horizon, BIDV retains compelling upside potential as the stock price will gradually reflect sustained book value growth (projected 5Y CAGR of 16%), supported by its leading position and competitive advantages as Vietnam's flagship state-owned bank and primary capital channel for high-growth economic objectives.
• Risks: The Government's ambitious high-growth targets may give rise to risks of uncontrolled inflation and exchange rate volatility beyond the SBV's management capacity, potentially impacting key drivers of growth, profitability, and asset quality.