FREE

HDB - Outstanding growth driven by the expansion of non-interest income

1Q25 PBT recorded solid growth, driven by a significant increase in non-interest income
• Consolidated PBT in 1Q25 reached over VND 5.3 trillion (+31% QoQ, +33% YoY), fulfilling 26% of the full-year PBT target (VND 21.2 trillion). The strong growth was driven by (1) a sharp increase in non-NII (+204% YoY), and (2) well-controlled operating expenses (+3% YoY).
• Net interest income growth slowed to 3.5% YoY, mainly due to a quarterly NIM narrowing of 80 bps QoQ to 4.8%. Parent bank credit growth reached 2.9% YTD, a slower pace compared to the same period last year (1Q24: 6.3% YTD), with the main driver was the SME & CMB segment, growing 4.1% YTD (1Q24: 9.2% YTD). Meanwhile, retail lending rose only 0.7% YTD (1Q24: 2.3% YTD), and HDSaison’s credit growth reached 0.9% YTD (1Q24: 4.2% YTD).
• Asset quality continued to weaken, with new NPLs formation surging to VND 3.6 trillion (4Q24: VND 1.9 trillion). The parent bank’s NPL ratio (for customer loans) increased to 2.2% (4Q24: 1.7%) and at HDSaison was 7.35% (4Q24: 7.39%). The consolidated NPL coverage ratio dropped to 53% (4Q24: 69%).
2025 Outlook: Robust growth in total operating income
• 2Q25 PBT is projected to reach nearly VND 4.7 trillion (-13% QoQ, +13% YoY). We believe 2Q25 business results will be less favorable than 1Q25 mainly due to a contraction in non-interest income (from a high base in 1Q25) and an unchanged NIM. Compared to the same period last year, strong non-interest income and optimized operating expenses are expected to be the main contributors to profit growth.
• Full year 2025F PBT is projected at over VND 20 trillion, up 20% YoY. Credit scale is expected to expand rapidly thanks to increased credit quota following the acquisition Dong A Bank, combined with a strategy to boost lending to enterprises in the real estate, construction, and public investment sectors. In return, NIM is forecast to decline by nearly 50 bps to enhance lending competitiveness. Non-interest income is expected to grow positively by leveraging the HD Financial Group ecosystem, expanding bancassurance partnerships, and benefiting from Resolution 42 on bad debt settlement. Operating and provision expenses are expected to increase by 7% and 10% respectively in 2025, to support digital transformation efforts and maintain asset quality metrics.
Valuation and recommendation
We maintain a positive outlook on HDB's PBT and ROE growth potential, placing it among the sector leaders, thanks to its rapid credit expansion and development of non-interest income sources. However, asset quality risks remain, particularly as repayment capacity among household business customers in the agriculture sector shows no signs of improvement. In addition, the planned private placement to a strategic investor presents a revaluation opportunity for HDB stock, given that the bank has reduced foreign ownership limits from 20.0% to 17.5% in 2024 and is currently seeking a strategic investor.
HDB shares are currently trading at a trailing P/B of 1.3x, with the projected 2025F BVPS at VND 18,900, implying a 2025F P/B of nearly 1.2x. HDB’s 1-year forward target P/B could reach 1.25x, reflecting the bank’s asset quality risks. Based on a valuation using the Residual Income and P/B methods with equal weighting (50% allocation to each method), we derive a target price of VND 26,300 per share for HDB. This corresponds to an ACCUMULATE recommendation with an expected return of 13% compared to the closing price on Jul 9th, 2025 (including VND 1,000 dividend over the next 12 months).