VIB Update – BUY

We lower our 12-month target price by 4.7% to VND18,400/share, mainly due to (1) lowering our target P/E from 8.0x to 7.0x to reflect a higher interest rate environment, and (2) rolling our target price forward to mid-2027. However, we upgrade our recommendation from OUTPERFORM to BUY as VIB’s share price has declined 15.5% since our previous report. In 1H2026, the bank completed 45% of its full-year PBT target and 50% of our full-year forecast. For FY2026F, we slightly reduce our PBT forecast by 4% to VND10,453bn, representing 14.8% y/y growth (vs. the AGM target of 27% y/y growth).

Q2/2026 PBT reached VND2,383bn, -8.2% y/y and -15% q/q, mainly due to a doubling of provisioning expenses y/y and the absence of the one-off fee income from card partnership with Visa.

Credit growth remained sluggish, reaching 4% YTD and 11.4% y/y as of 2Q26, lower than industry of 8% YTD and 17% y/y), mainly due to weaker mortgage demand from retail customers and a credit growth quota of only 11–12%. Retail loan proportion continued to decline to 65.8% of total loans, from nearly 90% in 2022. NIM recovered modestly to 3.23% (+18bps q/q, although -4bps y/y), as higher lending rates were increasingly reflected in asset yields.

NFI declined (down 12.9% y/y and 45.1% q/q), mainly due to a VND423bn loss from FX trading. However, fee income from cards, payments and bancassurance has shown positive signs and should support VIB’s NFI growth going forward.

Asset quality was under pressure, although it has improved significantly compared with the 2023–2024 period. Overdue loan formation ratio increased to 0.5% per quarter – equal to historical average. NPL ratio and Group 2 loan ratio remained stable at 2.93% and 2.56%, respectively. Provisioning expenses remained above VND1,200bn per quarter, doubling from the low base a year earlier, in order to maintain NPL coverage ratio at around 43% while creating room for NPL write-offs.

Given VIB’s modest earnings recovery outlook amid a persistently high interest rate environment, we apply a target P/E of 7.0x, in line with its historical median. Accordingly, our 12-month target price is VND18,400/share.