MB Securities Company (MBS) has released an analysis report on the Commercial Joint Stock Bank for Industry and Trade (VietinBank CTG).
According to MBS, the difficulties in raising Tier-1 capital as well as the maximum foreign ownership status will limit the ability to expand credit as well as profit of the bank.
The first difficulty comes from the fact that VietinBank must comply with the regulations of the State Bank of Vietnam (SBV) on paying cash dividends to the State budget instead of dividends in shares or bonus shares.
Moreover, according to Decision 58.2016.QD-TTG of the prime minister, in the period of 2016-2020, the State ownership in banks shall not be reduced to less than 65 percent and the State ownership at CTG is currently 64.46 percent. The SBV is likely not to participate in the private placement of CTG.
“We believe that the possibility of issuing additional shares for external investors is low because this may reduce the ownership ratio of the State at the bank”, said MSB. The foreign ownership room at VietinBank has currently reached the maximum limit of 30 percent and it is quite challenging to increase the ownership of foreign shareholders.
In addition to the pressure of increasing capital MBS also noted the risks of lending to build-operate-transfer projects and state-owned enterprises at VietinBank. In 2016, the bank provided loans to 31 BOT projects worth about 27.886 trillion dong (accounting for 4.3 percent of the bank’s total outstanding loans). This number ranked the second among banks which offered loans to BOT projects.
Of the 31 BOT projects, about 21 of them have completed and 10 are under construction. VietinBank reported that the unpaid loans currently meet the standards. “Therefore, we forecast that the BOT loans of the bank will face high risk of liquidity when the construction time does not match the loan period”, said MBS.
In addition to the above risks, MBS assessed that with the advantage in capital, high brand recognition, extensive network of a state-owned joint stock bank as well as good asset quality, VietinBank’s net profit in 2018 is forecasted to grow impressively by 29 percent compared to other state-owned banks. The bank’s Return on Equity (ROE) of VietinBank in 2018 and 2019 is predicted to reach respectively 14.6 percent and 16.8 percent.
