ACB - Expecting strong credit growth, improvement in NIM - Analyst Meeting Note

1. Impact of US tariffs on ACB:

• Short-term impact: ACB's exposure to import/export activities is limited, with only 5% of ACB’s customer loans book potentially affected by higher tariffs. Additionally, ACB finances separated shipments rather than entire companies, and its selection criteria ensures that these businesses are not overly reliant on a single export market. Therefore, in the short term there will be immaterial impacts on ACB’s customer revenue.
• Long-term impact: In the long run, high tariffs could indirectly affect industries related to supply goods, services, and materials for export businesses, as well as household income, which may lead to reduced credit demand in the retail segment. However, the Government is actively negotiating for more favorable tariff conditions. ACB is confident that the Government will implement supportive policies (such as public investment and policies to boost domestic consumption) and explore alternative export markets to mitigate these effects. 

2. Credit Growth:

• ACB recorded 3M 2025 credit growth of 3.1%, slightly below system-wide growth of 3.9%. This was due to (1) uneven credit growth across regions, with the northern market performing stronger than the south (HCMC’s credit growth in Q1 2025 was +1.3%; Binh Duong -0.5%), with ACB having a stronger focus on the south, and (2) slow growth in ACB’s SME customers (+0.5% in 3M 2025) was due to business challenges and cash flow difficulties.
• However, ACB expects Q2 2025 credit growth to be around 5-6%, reaching 8-9% in H1 2025. This will be driven by (1) ACB actively targeting stronger SME industries, and (2) the expectation that Government policies, especially provincial mergers, will stimulate the real estate market in the south.
• Loans to real estate businesses and industrial park businesses account for only 2% and 1.5% of ACB’s loan book, respectively. 
• In 2025F, ACB expects loan growth to individual customers to reach 16-18% YoY, and loan growth to large corporate customers to achieve 30-40% YoY. 

3. Net Interest Margin (NIM):

• ACB's Q1 2025 NIM continued to decline QoQ due to slow improvements in lending rates amid intense competition between banks, along with a decrease in the CASA ratio (-1.24 ppts QoQ) caused by weaker cash flow among SME customers.
• The bank expects NIM to bottom out in Q2 2025 and then increase from Q3 2025 onward, driven by the restructuring of its loan portfolio and a decrease in funding costs starting from April 2025.
• A notable development in Q1 2025 is that ACB, with its large and healthy portfolio of Government bonds, utilized these to borrow low-cost funding from the SBV and then lent those funds in the interbank market at higher lending rates, generating additional earnings for the bank. 

4. Asset quality:

• ACB believes that its NPL ratio peaked in Q4 2024.
• The bank projects that the NPL ratio will reach approximately 1.2% by the end of 2025, with provision expenses expected to decrease in the coming quarters, driven by faster recovery of bad debts. 

Our thoughts: Although ACB's Q1 2025 earnings fell slightly short of our expectations, we remain confident in the bank's asset quality, which, along with supportive Government policies, helps mitigate the negative impact of macroeconomic uncertainty. Currently, we have a BUY rating for ACB.

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