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VIB - Growth decelerates under narrowing NIM pressure

Q4/25 and FY2025 Business results: Underwhelming results stemming from narrowing NIM and limited non-interest income growth.
• Credit growth was constrained by quotas, reaching 17.7% YTD; of which, the retail segment recovered slowly with an increase of 4.7% YTD. Q4/25 NIM came under pressure from rising mobilization costs, remaining flat QoQ at 3.1%; while the full-year NIM dropped sharply by 64 bps YoY to 3.1%, primarily impacted by net NPL formation peaking in 1H2025.
• Q4/25 non-interest income recorded a 28% QoQ growth, thanks to (1) bancassurance activities recovering positively (+103% QoQ) and (2) the recovery of written-off bad debts (+29% QoQ). However, accumulated for the full year, VIB's non-interest income only increased slightly (+3% YoY), which, combined with the downward trend in net interest income (-4% YoY), caused total operating income to remain flat YoY.
• A bright spot was the significant improvement in asset quality with net NPL formation in Q4/25 dropping to an extremely low level (over VND 200 billion) compared to previous quarters (an average of VND 1.3 trillion in the last 3 quarters). The NPL ratio (Customer loans) dropped sharply by 30 bps QoQ to 3.0%, the lowest level since 2022. The NPL coverage buffer was restored to 43% (Q3/25: 39%).
Q1/26 and FY2026 Outlook: PBT achieves high growth on a low base of the same period in 2025 thanks to NIM expansion; however, the risk of rising NPLs should be noted.
• Q1/26 PBT is forecasted to reach nearly VND 2.9 trillion (+39% QoQ, +19% YoY), in which the main growth driver primarily comes from the optimization of provision expenses (-78% QoQ, -36% YoY). However, Q1/26 credit growth is forecasted to be underwhelming, reaching only 1.0% YTD, as retail borrowing demand is affected by the upward trend in interest rates; combined with mobilization pressure, this quarter's projected NIM decreases by 10 bps QoQ to 3.0%.
• 2026F PBT is expected to reach over VND 10.9 trillion (+20% YoY) based on the expansion rate of interest income (+19% YoY); however, this result is lower than VIB's current plan (+27% YoY), as the upward trend in interest rates affects: (1) Income from the recovery of off-balance-sheet bad debts is lower than planned due to concerns about the ability to liquidate RE collateral, and (2) Provision expenses increase by 23% YoY, with projected net NPL formation remaining flat at a high level.
Valuation and recommendation
With improving ROE prospects, alongside better asset quality recovery under a stable macro environment and favorable conditions for bad debt recoveries, we believe OCB’s 1-year forward target P/B could reach 1.1x (higher than the previous report’s 0.85x), equivalent to 2025F-2026F P/B multiples of 1.1x and 1.0x, respectively.
We apply a blended valuation using (1) Residual Income Method (for long-term valuation) and (2) P/B multiple comparison (for short-term valuation), assigning a 50% weight to each. Accordingly, we derive a target price for OCB of VND 18,800 per share, equivalent to an ACCUMULATE recommendation with an implied upside of 14% versus the closing price on Apr 17, 2026.