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- We attended VCB’s AGM in Hanoi on April 27. The meeting’s main agenda was to (1) review 2023 results and approve 2024 targets, and (2) approve VCB’s restructuring plan associated with bad debts handling for 2021 - 2025.
- The Q&A section focused on (1) the progress on private placement, (2) Q1 2024 preliminary results, (3) risks from loans to other credit institutions, and (4) the progress of receiving a distressed credit institution (DCI).
- 2024 targets include (1) total asset growth of 8% YoY vs our full-year forecast of 15% YoY, (2) funding growth of 8%, which could flexibly adjust in accordance with credit growth, and (3) the NPL ratio to be kept below 1.5% vs our full-year forecast of 0.9%.
- The official target for 2024 PBT was not disclosed at the AGM and will be set by the SBV. However, the banks shared that the 2024 PBT target is set to increase to 4.8%, equivalent to around VND43tn, with credit growth of 12% vs credit quotas of 15.93%.
- FY2023 dividend payment plans: to use all retained profit to pay stock dividends.
Regarding support for weak credit institutions, VCB has submitted a plan to the SBV and expects the plan to be approved in 2024. However, while awaiting for official approval from the authorities, VCB has proactively assessed the differences in the operations of the weak bank (i.e., in terms of human resources, internal operating procedures, technology, etc) compared to VCB in order to propose solutions to narrow the gap between the banks.
The bank will focus on corporate customers in 2024, since credit demand from retail remains weak, particularly in demand from mortgages. Corporate lending will target FDI customers, large corporates with strong financial positions, and industrial park developers. Additionally, VCB plans to disburse credit from Q2 for major public projects such as the Long Thanh International Airport (with a total credit pool of USD 1.8bn, in which VCB’s disbursement commitment is USD1bn; and BID and CTG’s total disbursement commitment of 800mn) and gas projects (Block B project). Regarding the loans to construction bank (CB), the loan balance for CB was VN6.7tn, which was classified as Group 5 in 2023. However, the loans for CB currently are reduced to VND1tn in Q1 2024, thus, the banks reversed provisions for loans accordingly.
Progress on the private placement and restructuring plan associated with bad debts handling for 2021 – 2025. The bank shared that the progress on private placement depends on the actual economic situation. However, the bank still maintained its determination to finish it by 2025 at the latest. Regarding the restructuring plan associated with bad debts handling in 2021 – 2025, some of the highlights are in the table below.
| Indicator | Average growth target for 2021 – 2025 |
1 | Owner equity | 22% (aiming CAR of 11% in 2025) |
2 | Credit balance | 14% (will change according to credit quotas granted by the SBV) |
3 | Deposit | In line with credit growth |
4 | NPL | <1.5% |
VCB released its Q1 2024 results with TOI of VND 17.3tn (USD691.2mn; -6.7% YoY) and NPAT-MI of VND 8.6tn (USD343mn; -4.5% YoY), fulfilling 22% and 23% of our respective FY2024 forecasts. Overall, VCB’s results were weaker than our expectations due to (i) lower than expected NII, resulting from Q12024 weak credit growth; (ii) lower NFI, which is mainly due to weaker net income from FX trading and net other incomes. We see slight downside risk to our earnings forecast for VCB, pending a more extensive review.
- Q1 2024 credit growth was weak, at - 0.3%, with gross loans decreasing 0.3% and the corporate bond book dropping 1.2% QoQ and accounting for 0.8% of the credit balance.
- Q1 2024 customer deposit growth was -3.5% QoQ vs our full-year forecast of 14.0% YoY. In Q1 2024, VCB’s CASA ratio increased YoY but slightly decreased QoQ (-0.5 ppts).
- Q1 2024 NIM decreased 2 bps YoY to 3.14%, which is in line with our full-year forecast of 3.12%. On a QoQ basis, NIM improved 25 bps, which we attribute mainly to COF adjusting to the lower deposit rate faster than IEY in the first quarter of the year.
- Q1 2024 NOII was VND3.2tn (-25.8% YoY). The drop in NOII was mainly due to a 30% YoY decrease in net gain from FX trading, (2) a 3.8% YoY decreased gain from investment in securities, and (3) a 53% YoY decrease in net other income.
- Q1 2024 CIR was relatively flat YoY at 29.2 % vs our full-year forecast of 32%.
- Asset quality deteriorated YoY with the NPL ratio increasing by 35 bps YoY to 1.2% in Q1 2024 vs our full-year forecast of 0.9%. VCB’s Group 2 loan ratio decreased by 8 bps YoY, reaching 0.56%.
- Q1 2024 credit cost was 0.5% vs 0.69% in Q1 2023. LLR continued to decrease (- 27 ppts QoQ; -117 ppts YoY), however VCB’s LLR remained high at 203% in Q1 2024.
Figure 1: VCB’s consolidated Q1 2024 results
VND bn | Q1 2023 | Q1 2024 | YoY |
NII | 14,203 | 14,078 | -0.9% |
Non-interest income | 4,314 | 3,202 | -25.8% |
OPEX | (5,274) | (5,054) | -4.2% |
PPOP | 13,243 | 12,226 | -7.7% |
Provision expenses | (2,022) | (1,508) | -25.4% |
NPAT-MI | 8,986 | 8,580 | -4.5% |
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Loan growth** | 2.5% | -0.3% | -2.8 ppts |
Deposit growth** | 3.1% | -3.5% | -6.6 ppts |
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NIM | 3.16% | 3.14% | -2 bps |
Interest-earning asset yield | 6.16% | 5.36% | -80 bps |
Cost of funds | 3.38% | 2.50% | -88 bps |
CASA ratio* | 30.4% | 34.7% | 4.3 ppts |
CASA ratio plus term deposits in FX | 36.5% | 40.5% | 4.0 ppts |
CIR | 28.5% | 29.2% | 0.7 ppts |
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NPLs / Gross loans | 0.85% | 1.20% | 35 bps |
Group 2 loans / Gross loans | 0.64% | 0.56% | -8 bps |
Accrued interest / IEAs | 0.55% | 0.55% | 0 bps |
Source: VCB, Vietcap — *CASA volume included demand deposits and margin deposits; ** Q1 2023 and Q1 2024 loan and deposit growth is QoQ growth.
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