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Company Quarterly Earnings Update – VPB VN – 9M 2024
Summary of 9M/2024 results and outlook of VPBank (VPB VN)
- Net income rebounded by 39.1% y/y, driven by robust Net Interest Margin (NIM) expansion and ongoing asset quality enhancements. Credit growth was solid in 9M/2024, with total credit expanded by 16.6% y/y as the bank focused on portfolio restructuring to strengthen risk management. Mobilization was controlled with an 8.3% y/y growth, leading to an increase in the Loan-to-Deposit Ratio (LDR), which contributed to a notable improvement in NIM, rising by 44 bps. This contributed to a 32.2% y/y increase in Net Interest Income (NII). Net Fee Income (NFI) declined by 12.1% y/y, largely due to regulatory reclassification of Letter of Credit fees as interest income. Nonetheless, card fees remained resilient following the introduction of several innovative payment features, while banca fees surged on the back of a push into non-life insurance products. Cost control remained effective, with operating expenses edging up only 2.5% y/y, bolstered by substantial savings at FE Credit (FEC) following restructuring initiated since Q4/2021 after Sumitomo Mitsui Banking Corporation (SMBC) acquired a 49.0% stake. The company continued its diligent portfolio cleanup initiative, resulting in notable reductions in both the NPL and loan group 2 ratios, which also explains the 13.3% y/y rise in provision expenses.
- FEC posted positive profits for the second consecutive quarter with accelerating momentum. As the company continued tightening credit-granting standards, rigorously provisioning, and writing off bad debt, the nonperforming loan (NPL) ratio sharply declined to 17.9%, down from its peak of 25.7% in 2023. Despite stricter lending criteria, loan disbursements surged by 42.9% y/y in 9M/2024. Enhanced asset quality also reduced provisioning pressure and improved bad debt recovery.
- We anticipate a pickup in credit growth in Q4 while NIM remains stable. Operating costs are expected to rise, as the bank accelerates investments in digital infrastructure and sales forces, pushing the full-year Cost-to-Income ratio (CIR).
- For 2025, with anticipated economic acceleration and a stronger foundation post-restructuring, VPB is projected to achieve robust credit growth. NFI to be bolster by bancassurance as VPB captures non-life insurance market through extensive distribution channels, while improved economic conditions and a recovering real estate market are expected to boost income from bad debt recovery. Additionally, a more conservative credit portfolio and favorable economic trends are likely to lower provisioning costs, enhancing bottom-line growth
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Featured image credit: https://www.vpbank.com.vn/
