HO CHI MINH CITY DEVELOPMENT BANK (HDB)

We raise our 1-year target price by 10.0% to VND25,200/share as we roll our valuation forward to end-2027F. However, we cut our 2026F/27F PBT forecasts by 15.5%/14.6% (narrower NIM, higher provisions on rising NPLs). Maintain OUTPERFORM. 9M26 PBT reached VND18,379 bn (+24.2% y/y), completing 61.1% AGM target (VND30,100 bn) and 76.5% of our 2026F forecast (VND24,030 bn, +12.6% y/y).

3Q26 PBT fell 26.9% q/q to VND5,176 bn (+9.3% y/y) as provision expenses rose 31.6% to VND3,381 bn and NIM contracted, while 2Q26 had included a non-recurring gain from the consolidation of securities firm HDBS.

Credit grew 9.2% q/q and 31.8% YTD – 2.7x the system, supported by HDB’s role in restructuring Vikki Bank. Retail lending accounted for 53% of incremental loans in the quarter, while the share of real estate & construction rose to 25.6%. We forecast credit growth of 34% in 2026-27F.

NIM fell 47 bps q/q to 3.82% as cost of funds rose 64 bps to 6.80%, outpacing the yield on earning assets (+22 bps), as HDB had to raise funding at high rates to keep pace with credit growth. Funding (deposits + bonds) rose 7.1% q/q and CASA ratio dropped sharply to 7.8% (2Q26: 11.0%), but HDB still held net interbank deposits of VND49,000 bn. Deposit rate cuts in line with the SBV’s direction since late October will lower funding costs, but lending rates will also fall accordingly. We forecast NIM at 3.85% (-95 bps y/y) and 3.88% (+3 bps y/y) in 2026F/27F.

NFI rose 19.2% y/y to VND2,090 bn on net fee income (+41.3% y/y) and VND969 bn from the consolidation of HDBS since late May.

Asset quality deteriorated markedly. NPL ratio rose 63 bps q/q to 3.42% (end-2025: 2.44%) as the large volume of Group 2 loans formed in 2Q26 migrated to Group 3, while write-offs were only VND1,310 bn. Group 2-5 loans accounted for 7.3% of total loans, days of accrued interest rose to 42 days, and NPL coverage fell to 46% (industry median: 62.4%). We forecast credit costs at 1.55%/1.50% in 2026F/27F, with NPL coverage at around 48-49%.

We keep our target P/E at 7.0x – in line with peer banks in the same tier. Accordingly, our 1-year target price is VND25,200/share. Our forecasts do not yet factor in dilution from bond conversion, the planned private placement to foreign strategic investors, or the potential catalyst from the HDBS IPO.