How ACB conducts capital strategy

According to ACB's recently issued consolidated financial report and analysis of securities experts, the bank had barely 1% loan growth in the third quarter. By the end of June 2024, ACB had grown its credit portfolio by over 12.8%. As a result, ACB's loan growth over the nine-month period was 13.8%, surpassing the sector's 9% growth rate.

Slower Credit Growth

At the beginning of the year, ACB highlighted corporate clients and foreign direct investment (FDI) as key credit growth drivers. Unlike other banks of comparable stature (such as VPB, TCB, and MBS), ACB elected not to aggressively grow real estate financing. Corporate lending rose by 15%, with major corporate clients increasing by 51% year on year, representing for 8% of the loan portfolio.

ACB stated that the low credit growth in Q3 was the consequence of a deliberate delay to reorganize its portfolio and manage non-performing loans (NPLs).

Consequently, in Q3, ACB achieved pre-tax profits of VND 4,844 billion, down 4% year-over-year. For the nine months, the bank’s pre-tax profit was VND 15,334 billion, equivalent to 70% of its annual target (VND 22 trillion). Total assets increased 8% from the beginning of the year, reaching VND 777,392 billion.

ACB's deposits with the State Bank of Vietnam plummeted by 55% (VND 8,392 billion), deposits and loans to other credit institutions fell by 20% (VND 92,090 billion), and cash fell by 15% (VND 5,870 billion). Total NPLs amounted to VND 8,275 billion, a 41% increase from the start of the year; the NPL/loan ratio increased marginally from 1.22% to 1.51%.

KBSV noted that ACB's NPL ratio has likely peaked and is beginning to drop around the end of Q3 and early Q4, with the NPL ratio progressively reducing each quarter (2% rise in Q3). The NPL coverage ratio (LLCR) has improved from the previous quarter, and provisioning demands have lessened over the last two quarters. The pace of NPL resolution is projected to go up when the real estate market improves.

Positive Developments

ACB has made significant and encouraging progress in improving asset quality, restructuring its loan portfolio, and managing NPLs. To begin, ACB's restructured and supported loans under Circular 02/2023/TT-NHNN fell by 39% from the start of the year to around VND 1,300 billion (less than 0.2% of total outstanding loans).

Loans to clients affected by Typhoon Yagi were around VND 2,000 billion (or 0.5% of total outstanding loans), as the bank's business is mostly centered in the south.

Overall, both restructured and supported loans of ACB remain low and do not significantly impact profitability in the long term. However, short-term profit margins may decline due to interest rate support programs and efforts to maintain low-interest rates to boost lending amid rising market interest rates.

Second, from the start, ACB reduced bond investments and real estate loans, placing itself with a stable bond portfolio. Unlike in 2023, when retail clients accounted for 94% of its existing loans, particularly real estate consumer loans, which faced repayment issues during a weak property market, adjustments in the loan portfolio have provided the bank flexibility to expand lending.

Loan Room 

ACB was awarded a new credit ceiling of 18.4% by the State Bank of Vietnam, with a 4.6% credit limit available for loan expansion in Q4. ACB is well-positioned to exceed its credit ceiling since it can alter its loan growth rate, even during slow lending seasons.

ACB has increased its usage of debt instruments in anticipation for strong credit growth this year and next, with plans to issue a record VND 45,000 billion in bonds. According to data from the Hanoi Stock Exchange (HNX), by early October 2024, ACB had successfully issued 12 bond tranches worth VND 27,840 billion.

Previously, the bank issued a total of VND 18,900 billion in bonds in 2023, making it the bank with the largest bond debt in the market. This supports ACB’s medium- and long-term capital to meet future lending needs.

According to KBSV’s assessment, ACB’s NIM may decrease slightly or remain flat in Q4. In 2025, ACB's leadership plans to balance inflows and outflows to maintain the NIM ratio amid limited room for lending rate increases and a high base of policy rates. ACB actively issues long-term bonds with preferential interest rates (4-6%) to diversify funding sources and manage capital costs.

Furthermore, its low capital cost gives ACB more freedom in luring new clients through favorable loan programs, while still allowing opportunity to enhance NIM. With a steady business plan, SSI projects ACB's profit growth to be stable, with a ROE of more than 20% in the medium and long run.