BANK FOR FOREIGN TRADE OF VIETNAM (VCB)

We cut our 1-year target price by 21% to VND62,800/share, as we lower our target P/E to 11.7x (-1 standard deviation) on slower 2027F earnings growth and elevated interest rates and trim our 2026F PBT forecast by 5.3%, partly offset by rolling our valuation forward to 2027F. Our forecasts incorporate a 6.5% private placement in 4Q26. We downgrade to OUTPERFORM.

9M26 PBT reached VND40,440bn (+22.1% y/y), fulfilling 87.5% of the full-year plan (+5% y/y) and 74.7% of our forecast (VND54,117bn, +22.9% y/y).

3Q26 PBT was flat at VND11,218bn (-0.2% y/y) as VCB booked about VND5,000bn of additional provisions for corporate bonds. Excluding this one-off item, PBT rose about 44% y/y and 13% q/q (2Q26 adjusted for VND3,000bn of one-off income), driven by 39.1% y/y growth in net interest income.

Credit growth lagged the sector (+3.3% q/q and +8.4% YTD vs. +11.6% of the sector), of 13% credit growth quota. We lower 2026F credit growth forecast from 16% to 13%.

NIM rose 12 bps q/q to 3.11%, the highest since 1Q24, as the asset yield rose 40 bps to 6.1%, outpacing the 32 bps increase in COF to 3.31%. We forecast NIM of 3.06%/2.96% for 2026F/27F, down 10 bps in 2027F as lending rates decline in line with SBV guidance.

NFI rose 48.6% y/y as FX gains doubled to VND2,576bn, while fee income fell 3.6% y/y. Opex rose 33.0% y/y, but CIR fell to 31.6%, the lowest since 2Q24.

Asset quality remains best-in-class despite a slight uptick. The overdue loan formation rate was 0.15%, close to the historical average of 0.13%. The NPL ratio rose 10 bps q/q to 0.71% and Group-2 loans stood at 0.28%, while NPL coverage ratio fell from 279% to 243%, still the highest in the sector. We forecast credit costs of 0.71% in 2026F (including bond provisions), falling to 0.45% in 2027F.

The SBV has approved VCB’s private placement of up to 543.1 million shares (6.5%). Strategic shareholder Mizuho is expected to participate, and the remaining foreign room of 10.2% is sufficient for the issuance. Assuming the placement is completed in 4Q26 at VND55,000/share, BVPS would rise 4.6%, at the cost of roughly 5% dilution to 2027F EPS. We forecast 2027F PBT at VND60,722bn (+12.2% y/y), driven by 15% credit growth and credit costs normalizing to 0.45%, partly offset by a 10 bps decline in NIM.

With 2027F earnings growth slowing as the NIM expansion effect fades and credit growth remains average, amid elevated interest rates, we apply a target P/E of 11.7x, 1 standard deviation below the historical median, implying a 1-year target price of VND62,800/share. We downgrade to OUTPERFORM.