VPB – BUY

VIETNAM PROSPERITY JSC BANK (VPB)

We raise our 12-month target price by 16.7% to VND35,000/share, driven by (1) a 4% and 14% increase in our 2026F–27F EPS forecasts, respectively, due to lower expected credit costs, and (2) rolling our valuation forward to mid-2027. Accordingly, we upgrade our recommendation from OUTPERFORM to BUY. In 1H2026, VPB completed 45.7% of full-year PBT target and 45.0% of our forecast. For 2026F, we project PBT of VND41,912 bn, +36.9% y/y (AGM target: +35% y/y).

2Q26 PBT surged 76.3% y/y and 38.4% q/q, supported by robust credit growth, while operating expenses and provisioning costs remained well under control.

Credit growth remained exceptionally high at 40.6% y/y, 23.2% YTD and 11.8% q/q, significantly outperforming the industry (+17% y/y and +8% YTD), driven primarily by lending to real estate and construction corporates as well as corporate bonds. However, NIM continued to contract by 19 bps y/y and 15 bps q/q to 5.44%, as lending yields at separated VPB (~13%) and FE Credit (~21%) are already elevated, leaving limited room for further repricing, while funding costs need to rise further to support deposit growth.

NFI rebounded strongly, increasing 80.3% y/y and 86.9% q/q, supported by broad-based improvements across fee income, securities activities and recoveries from written-off loans, despite an FX trading loss of VND847bn.

As a result, TOI posted impressive growth of 42.0% y/y and 18.0% q/q. Meanwhile, operating expenses increased by only 4.8% y/y and 6.8% q/q, bringing the CIR down to just 19.6% – the lowest level in the banking sector.

Asset quality remained broadly stable. The overdue loan formation ratio edged up to 1.0% per quarter but remained below its historical average. The NPL ratio and Group 2 loan ratio were broadly unchanged at 3.3% and 3.2%, respectively. Credit costs reached ~VND8,000 bn per quarter, up 33.7% y/y, mainly reflecting a larger loan book, keeping NPL coverage ratio remained at ~56%.

Despite a higher interest rate environment, we expect VPB to deliver robust earnings growth of around ~35% per year, and therefore apply a target P/E of 7.0x, in line with the historical median of comparable banks. This results in a 12-month target price of VND35,000/share.