LPB - Solid loans growth but sharp NIM compression - Earnings Flash

LPB released its Q1 2025 results with TOI of VND4.7tn (USD181mn; +4.7% YoY) and PBT of VND3.2tn (USD123mn; +10.0% YoY), fulfilling 23% and 28% of our respective full-year forecasts. However, Q1 2025 PBT only completed 21% of the bank’s full-year guidance at VND14,868bn (USD575mn; +22.2% YoY). Overall, the bank's results tracked ahead of our expectations. We see slight upside to our current forecasts, pending a more extensive review.

• Credit growth in Q1 2025 reached 6.2%, beating our expectation and was better than system-wide credit growth of 3.9%. The corporate segment experienced strong credit growth of 8.2%, while the retail segment saw solid growth of 3.5% in the quarter.  
• Q1 2025 customer deposit growth was 3.5%, trailing credit growth. LPB's CASA ratio was 6.9%, down 3.8 ppts YoY and 2.9 ppts QoQ.
• LPB’s Q1 2025 NII declined 5.3% YoY, driven by a sharp decline in NIM, partially offset by strong credit growth. The NIM for Q1 2025 compressed to a multi-year low of 2.64% (-93 bps YoY, -116 bps QoQ), driven primarily by a significant decline in interest-earning asset yield (-150 bps YoY, -115 bps QoQ) partially offset by an improvement in cost of funds (-65 bps YoY, +5 bps QoQ). We suspect the meaningful decline in NIM was caused by (1) intense price competition due to the ongoing imbalance between supply and demand of credit, (2) a lower CASA ratio, and (3) deterioration in asset quality.
• Asset quality weakened QoQ with the NPL ratio rising to 1.73% (+34 bps YoY, +16 bps QoQ) in Q1 2025. The group 2 loan ratio rose to 1.39% (+59 bps YoY, +40 bps QoQ) in Q1 2025. In addition, LPB’s Q1 2025 LLR declined to 74% from 83% in the previous quarter. The Q1 2025 annualized credit cost was low at 0.23% vs 0.28% in Q1 2024.
• Q1 2025 NOII was VND1.4tn (+38.9% YoY). Within this, LPB's pure NFI grew slightly by 1.2% YoY with stable performance across categories. Additionally, LPB's net other income surged by 16x to VND448bn, driven by the recovery of previously written-off bad debts.  
• Q1 2025 CIR was 28.0%, improving from the Q1 2024 level of 30.7%, as OPEX declined 4.5% YoY, primarily driven by lower staff expenses. The bank continued to benefit from its efforts in restructuring operations to improve efficiency, including reducing the number of departments and shortening the approval process.

LPB’s consolidated Q1 2025 results

Source: LPB, Vietcap — *CASA volume includes demand deposits and margin deposits; ** Q1 2025 and Q1 2024 loan and deposit growth is QoQ growth.

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