The stock price of VCB (Commercial Joint Stock Bank for Foreign Trade of Vietnam) continuously set new peaks in the past week. This market-leading stock is giving an indication for other stocks in the same industry.
Bank stocks are differentiating
From the beginning of the year, VCB has risen by more than 47 percent to 79,000 dong per share (the closing price on July 19th). EIB of Export Import Commercial Joint Stock Bank (Eximbank) has also recorded impressive growth of nearly 31 percent. TPB of Tien Phong Commercial Joint Stock Bank (TPBank), MBB of Military Commercial Joint Stock Bank (MBBank) have also grown by respectively 14 percent and 20 percent.
Meanwhile, CTG of Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) has dropped by more than 17 percent to 21,200 dong per share at the end of the July 19th session. Similarly, HDB of HCM City Development Commercial Joint Stock Bank has declined by more than six percent to 26,400 dong per share.
The market prices of stocks are showing a clear differentiation, while most banks recorded positive business results in the first half of the year (H1).
For example, in the first six months of 2019, Vietcombank attained 11.280 trillion dong of pre-tax profit, up by 40.7 percent compared to the same period of 2018, completing 55 percent of the annual plan. According to TPBank, its H1 pre-tax profit was estimated at 1.620 trillion dong, up by 58 percent over the same period of 2018.
HDBank has revealed that the bank’s pre-tax profit in the first six months of 2019 was estimated to exceed 2.2 trillion dong; while Return on Asset (ROA) and Return on Equity (ROE) were respectively 1.7 percent and 20 percenthigh levels compared to other banks in the sector. HDBank’s consolidated Net Interest Margin (NIM) increased by 4.4 percentthe highest among banks that have announced their business results. The bank’s total outstanding credit reached more than 144 trillion dong, while its bad debt ratio continued to be controlled at one percent.
For Eximbank, the bank’s stock sharply increased in the context when the bank is having a “stormy time” in terms of senior personnel when there is a power struggle among major shareholder groups, the bank’s annual shareholders meeting has not been held yet, and its business results in the second quarter (Q2) have not yet been announced.
Waiting for waves in H2
Assessing the prospects of bank stocks from now until the end of the year, an expert in banking and finance sector said that bank stocks have seen significant corrections in the recent time, so this is an opportunity for investment, because the last two quarters of the year are the peak season of the banking sector and profit often increases strongly in this period. The “king” stocks, hence, are likely to rise.
From a different perspective, banking expert Dr Dinh The Hien said that the banking picture will continue to be strongly differentiated, especially under the pressure of the Basel II international standards as well as of the bad debt settlement, because the success depends on the health of each bank.
In fact, from the beginning of the year until now, only some stock codes such as VCB, MBB, ACB, etc. have recorded positive developments and been highly appreciated by analysts as the market prices are close to reasonable valuation. These banks efficiently develop retail lending and non-interest income activities. They are also well positioned to reduce the impact of rising capital costs and low credit growth limit. They also have good asset quality to limit risks when bad debts increa.se
Report analysing the investment strategy of VNDIRECT Securities Company stated that the banking sector will continue to be stable in the monetary tightening context. In H2 2019, the NIM will only inch up in some banks, and asset yields will be improved thanks to the rapid increase in retail lending. However, according to VNDIRECT, the mobilisation interest rates are under the pressure of rising, due to the increasingly fierce competition in attracting depositors and the impact of the US China trade war.
Notably, VNDIRECT mentioned that bad debts are going up in many joint stock banks, with the bad debt ratio of the entire system reaching two percent by the end of Q1 2019 from 1.9 percent in the end of 2018. In particular, the bad debt ratio will reach the peak in banks that promote retail lending, particularly consumer credit.
