We attended HDB’s H1 2026 analyst meeting, where management reiterated confidence in delivering its 2026 targets, supported by strong credit growth, ample funding and capital headroom, and continued operating efficiency. We believe HDB remains well positioned to utilize its high credit-growth quota and leverage synergies to maintain its top-tier ROE in 2026. However, asset quality deterioration in Q2 remains a key watch point, which could potentially pressure credit costs in the coming quarters.
1. Credit growth remains strong; H2 mix to shift toward higher-yield retail
- H1 2026 consolidated credit growth +18.9%, already well ahead of system growth. HDB’s full-year consolidated growth target is +37% (including HD Saison and HD Securities), implying remaining strong growth momentum in H2.
- H1 growth was broad-based across wholesale (+18.5%), retail (+20.7%), and consumer finance (+15.2%), with wholesale still accounting for ~70% of total credit.
- H1 disbursement was mainly directed toward infrastructure, social housing, wholesale/retail trade, accommodation, and real estate. Management expects faster H2 growth in higher-yield segments, particularly agriculture, mortgages, and household-business lending.
- Management remains confident that the current growth trajectory is compatible with its planned Basel III adoption from 2027.
2. Ample funding headroom supports growth; NIM recovery is the key H2 earnings lever
- H1 deposit growth was +20.5%, outpacing credit growth. Retail deposits rose 23.2%, representing ~70% of the funding base, while valuable papers increased 23.2%.
- In Q2 2026, parent-bank LDR remained low at 70.1% vs the 85% regulatory cap, providing significant room to deploy liquidity into earning assets. CAR remained strong at 14.3%, including Tier-1 CAR of 9.1%.
- HDB raised a USD721mn international syndicated/social loan and issued a USD100mn green bond, providing additional medium- to long-term funding and helping diversify funding costs.
- Management expects deposit rates to stabilize toward year-end, while lending rates should remain broadly flat with some potential downside. Against this backdrop, HDB expects to protect NIM through higher LDR, a shift toward higher-yield retail products, CASA growth, and diversified funding.
- Management maintains its ~4.5% FY2026 NIM target vs 4.1% in H1 despite higher funding costs. This implies a meaningful NIM recovery in H2 and remains the key earnings execution point, in our view.
3. Asset quality pressure increased but remains manageable
- Consolidated NPL ratio (per the bank) increased to 2.12% from 1.66% at end-2025, while parent-bank NPL stood at ~2.0%. Management guides for a 2026F consolidated NPL ratio of less than 2.0%.
- Risk buffers remain sizeable, with collateral coverage at 282%, although the LLR ratio declined to ~51% as the bank relies more heavily on collateral-backed recovery.
- We therefore see asset quality as manageable but worth monitoring, particularly as HDB maintains significantly above-system credit growth and accelerates retail lending in H2.
4. Strong operating efficiency and subsidiaries support group ROE
- H1 2026 ROE was ~25.4% and CIR was just 24.9%, keeping HDB among the sector leaders in profitability and operating efficiency.
- HDB targets VND30.1tn PBT in 2026, +41% YoY. This implies ~VND16.9tn of H2 PBT, or around 50% YoY growth, with management remaining confident in delivery.
- The bank is progressing with the IPO of HD Securities and HD Saison in 2026.
- HD Saison reached a VND25.5tn loan book, while H1 disbursement rose 34.6% YoY. H1 2026 PBT increased 13.4% YoY to VND804bn, with NIM/ROE at 26.7%/22.3%, respectively.
- HD Securities delivered H1 2026 PBT of VND1.47tn, +285% YoY, with ROE of 32.3%, strengthening the contribution from non-bank subsidiaries to group earnings.
5. Capital remains supportive of growth and shareholder returns
- HDB’s 14.3% CAR provides a solid capital buffer for its aggressive credit-growth plan, while management remains confident in transitioning toward Basel III from 2027.
- The bank is progressing its 700mn-share private placement, which should provide further capital headroom for medium-term balance-sheet expansion.
- Management indicated that the 30% stock dividend/bonus-share distribution should be implemented soon.
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