Military Commercial Joint Stock Bank (MB, HoSE: MBB) has recently announced that it has registered to sell up to 23 million treasury shares by order matching or put-through method. Notably, the number of shares registered to sell is 49 percent of the total treasury shares that the bank holds. Expected trading time is within 30 days after being approved by the State Securities Commission, but no later than March 31, 2020.
The purpose of selling treasury shares, according to MB, is to use them in business activities on the principle of ensuring safety, efficiency and bringing benefits to shareholders such as building operating offices, branch offices, investing in technology and equipment necessary for the stability and the development activities.
This action reminded investors of the 7.5 percent sale of capital that Bloomberg has reported recently. 7.5 percent of capital after the issuance is equivalent to 188.5 million MBB shares additionally issued, including 141.5 million new shares and all 47 million existing treasury shares, according to Bloomberg.
However, as mentioned, MB has just announced to register to sell a maximum of 23 million treasury shares, making many investors sceptical about the success of this issuance.
According to Bloomberg, the deal was closed at the end of November with the issuance price at around 30,000 dong per share (about 38 percent higher than the market price). Many investors expect this capital sale will push MBB stock price up, in the context of MB being one of the banks with the highest annual profit growth rate in the industry. However, the valuations in both Price to Earnings (P/E) and Price to Book (P/B) are quite cheap, below the industry average and much lower than many of the rivals, which have significantly lower annual profit growth. If the sale is not as expected in terms of sales or/and selling price, MBB shares have to rely on basic factors, which means they will never know how to escape from this worse scenario.
In early December, two major securities companies, VNDirect and VCBS, simultaneously released their comments on MBB shares and like other securities companies had previously reported, basic factors continue to be highly appreciated by analysts.
According to VCBS, MB is one of the joint stock commercial banks with a dynamic business model. The bank focuses most of its business in the retail segment, the asset quality is well controlled and has completed the process of risk provisioning and the recovery of all special bonds at Vietnam Assets Management Company (VAMC). VCBS experts believe that the retail segment will still be the main growth driver because MB focuses on customers and segments with high profitability.
The securities company emphasized that, in the context of increasing capital costs due to the decrease of demand deposits (CASA), the increase in the proportion of retail credit to total credit could help the bank improve the profitability of assets, so NIM ratios can remain stable.
As for Mcredita consumer finance company directly under MB, VCBS stated that increased competition in the consumer finance industry and the orientation of controlling the credit flow of the State Bank of Vietnam (SBV) might affect the business results of Mcredit in 2019 and 2020. “Mcredit is a factor helping MB’s NIM consolidation be improved in the following years. However, credit growth is not maintained at a high level as in previous years. Mcredit’s bad debt ratio may increase, forcing the company to make more provisions and write off bad debts.
As Mcredit’s loan balance accounts for only about 3 percent of the total consolidated loan balance, the negative impact on the operation results of the consolidated bank will not be large,” said experts from VCBS. As a result, MB’s revenue from non-interest activities is also forecasted to grow thanks to income from payment and insurance services, along with the recovery of loans processed by the risk reserve fund.
MBBS’s consolidated bad debt ratio is expected to remain not too high, while the provision for bad debt risk ratio will always be maintained at around 90100%. This, according to VCBS, shows that MB’s asset quality is good compared to the current banking industry average.
The securities company forecasts that MB’s 2019 profit before tax will be 9.943 trillion dong, up 28 percent compared to last year and exceeding four percent of the whole year plan. In 2020, VCBS considers two scenarios. In case the bank has not offered individual shares, the profit before tax will increase by nearly 12 percent to 11.125 trillion dong. And if the bank has completed a private offering of 7.5 percent of the shares, the profit before tax in 2020 will be 11.234 trillion dong, up nearly 13%.
Meanwhile, according to the evaluation of VNDirect Securities, MB is expected to achieve high profit growth in the coming years with an average EPS growth of 21.3 percent in 2018-2021. ROE is expected to maintain around 20 percent in 2019-2020, much higher than the industry average ROE of about 17 percent in 2019 and 16.7 percent in 2020.
“MBB is a top choice in our banking sector as it is able to seize opportunities to develop retail lending and take advantage of low-cost capital due to high CASA, minimising pressure. The price-raising factor could come from the divestment from Military Insurance Company (MIC). The risk of falling from the bad debt is higher than expected due to the expansion in the retail lending segment with higher risks, and rising interest rates,” the VNDirect report emphasized.
