Update VIB – NEUTRAL

VIETNAM INTERNATIONAL COMMERCIAL BANK

We raise our target price by 21% to VND 20,200/share after revising up our target P/E multiple from 6.5x to 8.0x, reflecting the improvement in VIB’s asset quality on the back of a favorable macroeconomic environment. However, as VIB share price has already risen 26.8% since our previous report, we downgrade our rating from OUTPERFORM to NEUTRAL.

VIB’s positive 2Q24 results benefited from the recovery in retail segment, with PBT reaching VND 2,596 bn (+23.4% y/y, +7.2% q/q). Key highlights:

• NII grew 0.6% y/y and 6.2% q/q, supported by strong credit growth (+27.5% y/y, +9.8% YTD), although NIM remained subdued (‑73 bps y/y, +7 bps q/q) at 3.27%.
• NFI rose 5.0% y/y and 32.9% q/q, driven by strong off‑balance‑sheet debt recovery (+73.3% y/y, +46.5% q/q). A more favorable real estate market has facilitated bad‑debt resolution.
• Operating expenses was kept stable, +4.4% y/y and +7.2% q/q. CIR remained elevated at 37%, above the sector average of 31%, reflecting VIB’s retail focus.
• Provision expenses stayed low (‑7% y/y, +50.9% q/q).
• Asset quality continued to improve but remains below peers. NPL ratio stood at 3.56% and special mentioned loans at 2.9%, -24 bps q/q and -40 bps q/q, respectively. However, modest provisioning left NPL coverage at just 37.2%, well below the 50%+ levels in prior years and among the lowest in the sector.

We forecast 2025 PBT to reach VND 10,063 bn (+11.8% y/y), achieving 91% of the AGM profit target. Key drivers include:

• Credit growth projected at 20% y/y, while NIM declines 71 bps to 3.24%, resulting in flat NII growth y/y. NFI is expected to rise 7.4% y/y on the back of robust off‑balance‑sheet debt recovery (+28.8% y/y). TOI is projected to grow 1.4% y/y.
• Operating expenses are projected to rise modestly 5% y/y amid weak top‑line growth, pushing the CIR slightly higher to 36.3% from 35.1% last year.
• Provision expenses are forecast to drop sharply by 26.2% y/y as bad debts come under control. However, NPL coverage is expected to decline to 43%, from 50% last year.