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VCB - Pioneering Recovery Initiatives

• VCB reported total operating income (TOI) of VND 17.4 trillion (+9.4% YoY) in Q2/23, driven by a growth in net interest income (NII) reaching VND 14 trillion (+9.6% YoY) combined with non-interest income of VND 3.4 trillion (+8.6% YoY). Effective cost control measures led to a decrease in the cost-to-income ratio (TTM) by 100 bps to 30.6%, and a 7.2% YoY reduction in provision expenses, resulting in a maintained PBT at a high level of 9.2 trillion VND (+25% YoY). For the first 6 months of 2023, the total TOI and PBT reached 35.9 trillion VND (+10% YoY) and 20.5 trillion VND (+18% YoY), respectively.
• Sources of non-interest income were different as income from net fee reached 1.6 trillion VND (+133% YoY), offsetting the slowdown in foreign exchange and collection activities. Fee income recorded significant growth in the second quarter due to changes in insurance fee income recognition. Card and payment activities remained strong, compensating for the decline in trade finance and insurance activities.
• The second half of 2023 is expected to see stronger credit growth as demand from individual businesses and large enterprises in utility, construction, and infrastructure sectors pick up. Combined with long-term relationships with major importers and exporters, VCB has maintained its advantage in non-interest income sources such as payments, transfers, trade finance, and foreign exchange. In the base case scenario, we estimate that net interest income will grow by 8% to reach VND 57.5 trillion, with credit growth of approximately 11% and NIM maintained at 3.2%. Non-interest income is expected to reach VND 16.8 trillion (+13% YoY). Consequently, the estimated total TOI and PBT are VND 74.4 trillion (+9.3% YoY) and VND 43.4 trillion (+16.2% YoY), respectively.
• We recommend to ACCUMULATE VCB with a target price of VND 99,500, equivalent to a 11,42% return compared to the closing price on September 22, 2023