BaoViet Bank Q3 profit falls as funding costs rise

The main drag was net interest income. Interest income rose to VND2.06 trillion in the quarter, but interest expense climbed faster to VND1.74 trillion, cutting net interest income by 32.5% to VND315.7 billion. The pressure came not only from higher deposit and borrowing costs, but also from a surge in other lending-related expenses and a jump in interest paid on borrowings.

That left BaoViet Bank leaning more heavily on trading and one-off items to stay in the black. Gains from proprietary securities trading rose to VND113.1 billion, about 3.8 times a year earlier, while other income turned positive at VND76.1 billion after a loss in the comparable period. Those gains, however, did little to mask the strain in the core franchise.

The more concerning signal for investors was the quality of earnings. Interest and fee receivables on the balance sheet climbed 28.3% to VND7,982.5 billion, a sign that a growing share of booked income has not yet been collected in cash. Over nine months, the bank recorded VND5.32 trillion of interest income on the income statement, but only VND3.56 trillion of cash interest received, leaving a gap of VND1.76 trillion that matches the rise in receivables.

Credit risk also worsened at the edges. Loans requiring attention, or group 2 loans, more than doubled to VND2.46 trillion from VND1.19 trillion at the start of the year. While on-book bad loans fell to VND1.47 trillion, loans written off and tracked off-balance-sheet rose to nearly VND4.98 trillion. BaoViet Bank set aside VND319.3 billion of credit risk provisions in the quarter and used VND316.8 billion of specific reserves over the nine-month period.

The earnings pressure comes against a backdrop of weak operating efficiency. Service income continued to shrink, with net fee income down 54.5% in the first nine months to VND196.7 billion. At the same time, the bank’s software assets appear close to the end of their useful life: computer software with an original cost of VND113.6 billion had only VND10.2 billion of book value left as of Sept. 30, and the bank added just VND168.8 million of new software in nine months.

That matters because fee income and digital transactions are increasingly the areas where smaller banks can defend margins against larger rivals. BaoViet Bank’s cash and non-current deposit base suggests limited room to absorb rising funding costs without either stronger digital usage or a broader retail funding franchise. Demand deposits fell to VND1.88 trillion from VND3.95 trillion, leaving only about 2.4% of total customer deposits.

The balance sheet picture also points to tightening liquidity. Operating cash flow was negative VND5.46 trillion in the nine-month period, deeper than the year-earlier deficit, and the bank increased borrowing from the State Bank of Vietnam to VND7.09 trillion. For a lender with VND112.5 trillion of assets, 22 branches and 1,509 employees, that combination of weak cash conversion, rising receivables and higher attention loans will likely keep pressure on margins and funding discipline into the final quarter.

For investors, the question is whether BaoViet Bank can rebuild core profitability without leaning on trading gains or balance-sheet carry. If receivables keep rising faster than cash collections, the bank may face a tougher choice between preserving growth and protecting capital.