Closing the session on March 31st, the VN Index stood at 662.53 points, the number that no investors could think of before entering 2020. At this level, the Price/earnings of the VN Index has dropped to only 9.8 times, the lowest in five years. In this context, it is difficult for bank stocks to avoid price decline. Thus, many bank leaders have spent hundreds of billion dong to gather stocks to be used as treasury stocks.
Tien Phong Commercial Joint Stock Bank (TPBank) has completed buying 10 million treasury shares as previously registered. The transaction was carried out from March 20th to 26th. The highest buying price was 22,700 dong per share and the lowest was 21,300 dong per share. The total amount of capital TPBank used to buy treasury shares this time is about 220 billion dong. After the transaction, TPBank raised its treasury share ownership to more than 40 million units.
Closing the session on March 3rd, the price of VPB shares of Vietnam Prosperity Commercial Joint Stock Bank (VPBank) was 17,650 dong per share. It is one of the bank stocks that experienced the largest decline in the month in the context when the entire stock market plummeted due to the effects of Covid-19 epidemic. Specifically, VPB price dropped by nearly 50 percent in March 2020.
On the stock market, since the outbreak of Covid-19, the market prices of many stocks have sharply fallen, including bank stocks. Many bank leaders and major shareholders have strongly bought in. The company of billionaire Nguyen Thi Phuong Thao Sovico registered to buy an addition of 10 million shares of HCM City Development Commercial Joint Stock (HDBank) during the period of from April 3rd to 29th. After completing the transaction, Sovico’s ownership at HDBank will be raised from 13.34 percent to 14.36%.
Other leaders of HDBank are also actively buying HDB shares. Recently, the bank’s deputy general director Tran Hoai Nam has registered to buy 500,000 HDB shares, expected trading time is from April 3rd to 29th, for investment purposes. Nguyen Huu Dang, member of the Board of directors cum general director of HDBank and Pham Van Dau, the bank’s Chief Financial Officer are also carrying out procedures to register to buy a total of 1.5 million HDB shares.
Leaders of HDBank have rushed to register to buy shares when HDB market share has plunged following the overall market downtrend due to the impact of the Covid-19 epidemic. At mid-day April 3rd, HDB market price was 19,550 dong per share, down by nearly 34 percent compared to the beginning of the year.
As estimated, about 30 businesses have announced information on buying treasury shares over the past month in order to stabilise stock prices. However, the question is whether this option is a “lifesaver” for stock prices when the disease has not been controlled?
Regarding credit growth, in the base case, it can reach 12.5 13 percent for the whole year 2020. In Maybank King Eng (MBKE)’s report in January 2020, the company also forecasted the credit growth at 13-14 percent when saying that housing and construction mortgage lending would slow down.
Regarding the selection of bank stocks for investment, MBKE’s approach is to always choose banks with clear competitive advantages which are able to maintain growth and profitability in the long term, and the ability to resist shocks in the short term. The first thing to consider is the bad debt ratio and the ability to prevent bad debt risks. Accordingly, the four recommended banks are Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), VPBank, Military Commercial Joint Stock Bank (MBBank) and Asia Commercial Joint Stock Bank (ACB).
With good asset quality and good provisions for bad debts, Vietcombank and ACB are capable of maintaining good profit growth in 2020 (at 20-26%) and Return on Equity (21-23%). ACB is a good bank, but it is difficult for foreign investors to buy ACB shares because the bank has run out of foreign ownership room. Meanwhile, the story VPBank this year is still the possibility of selling FE Credit at much higher price than the current market valuation.
For MBBank, considering the current valuation and competitiveness of MBBank, MBKE still maintained its recommendation based on the long-term growth prospect of the industry. Foreign investors related to Dragon Capital MBBank’s major shareholder have also announced a change in the ownership rate at this bank. After the transaction was completed, on March 27th, the ownership rate of this group of shareholders changed to over six percent, reaching 146.8 million shares.
According to MB Securities Company (MBS), although the Covid-19 epidemic is still complicated, the reaction in the market shows strong resistance of bank stocks with the disease. Instead of selling off, investors turned to bank stocks. However, not all bank stocks will rise in the near future. Therefore, investors should choose bank stocks that have not increased sharply, banks which have large room for credit growth and have completed the targets of clearing all bad debts according to Basel II standards, etc.
