Update BID – OUTPERFORM

BANK FOR INVESTMENT & DEVELOPMENT (BID)

We maintain an OUTPERFORM recommendation for BID with a 1-year target price of VND 44,000 per share, based on target P/E and P/B ratios of 12.7x and 1.7x, respectively. 2025’s profit growth is expected to slow down due to the high base from bond profit-taking in 2024, despite a potential NIM recovery driven by increased retail lending.

2024’s PBT grew by 13.8% y/y, supported by strong bond profit-taking and off-balance sheet debt recovery (+70.6% y/y and +49.4% y/y, respectively), particularly in Q4. NFI surprisingly emerged as a profit growth driver (+36.6% y/y) amid challenges in NII. Credit growth remained good (+15.5% y/y) but NIM declined significantly (-25bps y/y) to 2.38% due to lower lending rates, leading to NII growth of only 3.3% y/y.

Asset quality saw a slight improvement, though potential risks are increasing. NPL and Special mentioned loan ratios were kept stable at 1.41% and 1.66%, respectively, at the end of Q4/24. Restructured loans accounted for a low proportion of ~0.4%. NPL coverage declined but rebounded slightly in Q4/24 to 134%. A notable concern is the sharp rise in interest collection days from a healthy level of 30 days in mid-2023 to 57 days currently.

For 2025, we forecast PBT at VND 34,657 billion (+10.4% y/y). Our forecast aligns with BID’s management guidance of 6-10% profit growth. Key assumptions:

(1) Credit growth of 15.6%, with NIM improving by 12bps to 2.5%, driving NII growth of 22.8% y/y. BID’s current low lending rate (~6.5%) could improve as retail loans grow by 24.6% in 2024, increasing retail lending proportion from 43.9% to 47.3%.

(2) NFI to decline by 11.2% y/y due to the high 2024 base from bond gains, despite positive off-balance sheet debt recovery prospects, supported by real estate market recovery and large outstanding off-balance debt balance (~VND 130,000 billion).

(3) Operating expenses to stay flat (+1.3% y/y) as BID’s headcount shrank by 3% in 2024. CIR (excluding bonuses & welfare fund provisioning) is expected to decline from 34% to 31%, ensuring BID’s profitability.

(4) Provision expenses to rise 32% y/y to maintain a prudent buffer amid weaker coverage levels. LLC is expected to be maintained at 134% by year-end 2025.