The recent sharp drop of many bank shares has ringed an alarming bell that the divestment and sale of foreign capital has gradually come to an end.
*Earning hundreds of billion dong from divestment
Taking advantage of the market growth momentum t as well as complying with the capital divestment roadmap following Circular No. 36/2014/TT-NHNN, many banks have sold the shares they held in other businesses and banks, earning a very large sum of money over the last period.
Le Van Quyet, CEO of Eximbank said from November 29, 2017 to January 19, 2018, Eximbank divested the entire capital from Sacombank (coded STB) after completing the sale of the remaining more than 12 million STB shares (equal to 0.637 percent stake) through matching method.
With the average selling price of 14,064 dong per share, this sale of shares brings Eximbank nearly 648 billion dong profit, of which 126 billion dong was recorded into 2017 net profit and more than 521 billion dong was recorded in Q1/2018. At the beginning of 2017, Eximbank held more than 156 million STB shares, accounting for 8.76 percent of Sacombank’s chartered capital.
Reportedly, Eximbank invested in STB shares since 2012 after having purchased the shares from ANZ. Then, in order to divest following regulations in Circular 36/2014/TT-NHNN, Eximbank started to sell STB shares.
However, due to many reasons, Eximbank could not divest from Sacombank as of the beginning of 2018.
Utilising the growth momentum of bank shares in general and STB shares in particular in 2017, not only Eximbank, Kienlongbank also took advantage of reducing the number of STB shares being owned. As of the end of Q1/2018, the value of Kienlongbank’s investment in STB fell from 521 billion dong to 230 billion dong.
At Vietcombank, the capital divestment pressure was larger when this bank held shares at five other credit organisations as of the end of 2016. Specifically, 8.19 percent stake at Eximbank, 4.3 percent stake at Saigonbank, 7.04 percent stake at MB, 4.72 percent stake at OCB and 10.91 percent stake at Cement Finance Joint Stock Company (CFC).
In 2017, Vietcombank successfully divested the entire capital from CFC and Saigonbank earned more than 340 billion dong, reducing the ownership at OCB from 4.72 percent to 3.97 percent. At the recent auction on April 17, Vietcombank successfully sold the remaining shares, earning nearly 172 billion dong.
Nghiem Xuan Thanh, Chair of Vietcombank said the divestment from Eximbank and MB will continue to be carried out in 2018 as the bank’s direction is not to hold shares at any bank. However, so far, there still has not had any divestment move from these two banks.
According to Hochiminh City Securities Company (HSC), if Vietcombank completes the capital divestment from all the five aforementioned credit organisations, this bank may earn about 2.5 trillion dong profit. However, some people said Vietcombank may retain the investment in MB and Eximbank, provided that the ownership rate there decreases to less than five percent because under Circular No.36/2014, a bank may hold maximum shares at two other credit organisations at less than five percent.
*King stocks hard to soar again
According to the recent information from VietABank, the bank is making large profit with the investment in PGBank. According to 2017 audited financial report, Viet A Bank spent 150 billion dong on purchasing 4.16 percent stake of PGBank (about 12.40 million shares, equal to the capital price of about 12,000 dong per share).
On OTC market, as of May 14, the market value of PGBank was offered to buy at 20,000-23,000 dong per share. It is estimated that VietABank is earning about 100-138 billion dong with this investment.
If not selling, VietABank does not have to worry too much. The reason is because PGBank and HDBank approved merger plan, which is expected to be completed in August 2018.
Accordingly, the share swap ratio will be 1:0.621, or one PGBank share for 0.621 HDBank share. PGBank committed that shareholders agreed that the entire shares under the share swap ratio will be frozen and only 30 percent could be transferred six months after the official merger and the remaining 70 percent will be transferred 12 months from the official merger date.
As such, if holding PGBank shares after merging into HDBank, VietABank will own 7.75 million HDBank shares. With HDBank share price being listed around 42,000 dong per unit and the potential of this bank, profitability is clearly significant for Viet A Bank.
Apart from PGBank, VietA Bank is holding shares at 12 other organisations, including 11 public companies with the ownership rate of 0.11-11 percent and most of which have not listed or brought shares to transact on the stock exchanges.
Analysts say that the strong growth of the stock market over the last period is the suitable moment for banks to divest and earn high profits. However, in the context that the market is adjusting after a long period of price increase, the sale as well as investment in “King stock” need to be prudent.
The judgement was given by financial analysts. The fact that bank share prices are picking up is the opportunity to divest to gain high profit. However, for small investors, the investment in bank shares at this time should be cautious and there should select banks that have positive growth after the restructuring process.
SSI Retail Research said regarding business operations, the year 2018 is still forecasted to be a successful year for the banking sector when the macro situation continues to be stable and credit operation maintains positiveness.
The reality also shows that the after-tax profit in Q1/2018 of 12 listed banks increased 51.6 percent from the same period of 2017, and was higher than the increase of 36 percent in 2017, of which, many banks doubled or tripled such as ACB, HDBank, TPBank, Eximbank, etc.
However, the sharp decline in April 2018 showed that positive business results are not enough to support this share group. Ending the trading session on May 15, VCB shares fluctuated at 60,000 dong; compared to 50,000 dong of VPBank; 40,000 dong of HDBank; 44,600 dong of ACB, and less than 30,000 dong of TPBank, significantly lower than the beginning of the year.
SSI Retail Research assesses that though bank group has not so high P/E, the P/B has been expensive. The P/B of VCB peaked at five times, while the average of bank shares has the average scale of just 1.5 times. The P/B of many other bank codes such as BID, VPB, HDB, ACB, etc. exceeded the threshold three times.
