Update HDB – Outperform

We raise our 1-year target price by 13.4% to VND 30,000/share and maintain our OUTPERFORM recommendation, mainly due to increasing our 2026 earnings forecast by 12.3%. Our target price is based on a target P/E of 7.0x – equivalent to the historical median. Earnings are forecast to continue strong growth in 2026, despite the high interest rate environment and signs of a slowdown in the real estate market.

PBT in 2026 is expected to continue strong growth. HDB has consistently maintained impressive profit growth over the past 10 years, even during difficult periods. In 2026, we forecast PBT to continue growing well, reaching VND 28,187 billion, up 32.8% y/y, slightly higher than the AGM plan of 31.9%.

High credit growth is the main driver of PBT growth in 2026. With the responsibility of restructuring VikkiBank, HDB is granted a credit growth quota of up to 35% by the SBV. This is a major advantage for HDB in the context that the SBV targets system credit growth at 15% in 2026, down from 19% last year. Other banks that do not take over weak bank restructuring are currently only granted credit growth quotas of 11–12%.

NIM is forecast to be flat at 4.8% as lending rates have also rised in line with deposit rate increases. Overall, HDB’s liquidity is quite solid, thereby helping cost of funds not increase too sharply amid tight liquidity conditions in the banking system.

Asset quality may face pressure in 2026. The high interest rate environment (estimated increase of ~3 ppts since Q3/25) may create financial pressure on customers in the real estate and construction sectors, which currently account for ~34% of HDB’s loan book. Therefore, we forecast the overdue loan formation ratio to increase to 2.5% in 2026, from 2.1% in 2025. Provision expenses are forecast to increase only 15.2% y/y due to the high provisioning base last year. NPL coverage ratio is expected to maintain at 52%.

Overall, we forecast HDB’s PBT in 2026 to maintain high growth, however, the high interest rate environment may put pressure on asset quality of the banking sector, in which HDB is relatively sensitive to high interest rate risk due to the large proportion of consumer finance and real estate lending. Therefore, we apply a target P/E of 7.0x – equivalent to HDB’s historical median.

Catalysts for the stock price

In October 2025, bondholders converted USD 160 million of convertible bonds into 349.3 million HDB shares. By Q3/26, another tranche of USD 165 million convertible bonds will mature for conversion. Estimated EPS dilution is 6.5%, assuming all remaining bonds are converted.

A good aspect is that the conversion of bonds will continue to strengthen HDB’s Tier 1 capital and reduce reliance on Tier 2 capital. A stronger capital structure gives HDB more room to raise additional Tier 2 capital (not exceeding 100% of Tier 1 capital) in the future when it needs to strengthen CAR.

HDB also plans a private placement to foreign strategic investors. Currently, foreign ownership at HDB is ~22% (excluding a potential additional 6.5% if convertible bonds are exercised), therefore, HDB may need to raise foreign ownership limit above 30% to execute the placement. With the mandatory transfer of Vikki Bank, under Decree 69/2025, HDB will be allowed to raise foreign ownership limit up to 49%, compared to the general cap of 30% for banks. Issuance to foreign strategic investors is typically conducted at a premium to market price, thereby positively impacting HDB’s stock price.

Another catalyst is that HDB may IPO and list HDB Securities (HDB owns 30%) in 2H2026 and convert its subsidiary HD Saison into a joint stock company in the future.