FREE

VPB - Asset Quality Improvement is Crucial for Valuation Rerating

1Q2025: Consolidated PBT Grows 22% YoY, Driven by Low Base Effect at FE Credit.
• Parent Bank PBT remained flat YoY. Credit growth reached 5.4% YTD, with corporate loans expanding by 8.5% YoY, primarily in Commerce (+14%) and Real estate (+3%), while individual retail loans grew modestly at 1.1%. NIM declined 20 bps QoQ, mirroring the drop in asset yields as funding costs held steady. Quarterly credit costs were 0.5%, with a net NPL formation rate of 1.1%. The on-balance sheet NPL ratio at quarter-end stood at 3.33% (+30 bps QoQ).
• FE Credit PBT recorded VND79 billion (1Q24: -VND852 billion loss). Credit growth was 1.7% YTD (1Q24: -0.5%), with an estimated NIM of 18.8%, up 80 bps YoY. The overdue loan ratio was 29.5% (+0.2% QoQ).
• VPBank’s PBT reached VND363 billion, surging 114% YoY, fueled by a VND242 billion gain from securities trading (vs. a VND90 billion loss in 1Q24). Credit growth (including margin lending and corporate bonds) achieved 22.0% YTD.
2025F-26F Outlook
• We anticipate: (1) progress in resolving legal and regulatory hurdles for real estate firms in Southern Vietnam during the second half of the year, which should reduce NPL formation rates and credit costs for the parent bank, and (2) continued balance sheet stabilization at FE Credit following its robust restructuring efforts. Consolidated credit costs are projected at 3.5% in 2025F and 3.2% in 2026F, down from 4.4% in 2024.
• Consolidated credit growth is forecast at 23.6% in 2025F and 23.7% in 2026F. Consolidated NIM is expected to decline by 20 bps in 2025F and stabilize in 2026F.
• NAPT-MI is projected to grow by 29% in 2025F and 14% in 2026F, reaching VND20.4 trillion and VND23.4 trillion, respectively.
Valuation and recommendation
We maintain a positive outlook on VPB’s prospects, forecasting a 22% CAGR in profit growth over 2025F–28F. Key growth drivers include elevated credit growth quotas following the mandatory transfer of GP Bank and disciplined credit cost management. We expect VPB’s net NPL formation to peak in 2025, with asset quality improvements anticipated in subsequent years, supported by the real estate market recovery and operational refinements at FE Credit. These factors will be pivotal to VPB’s re-rating potential. Key risks include a slower-than-expected resolution of legal issues for Southern real estate projects, potentially driving higher-than-forecast retail NPLs, and lower-than-expected NIM amid high credit growth pressures, particularly if retail credit recovery remains uneven across products.
Using a combination of residual income and P/B valuation methods, we derive a target price for VPB of VND22,800 per share, implying an expected return of +24% (as of July 3rd 2025). We recommend a BUY rating for VPB.