Banks to lead market growth in 2021: experts

Friday, Dec 18, 2020 08:01

Some large-cap creditors planning to raise capital include Vietcombank, Vietinbank and BIDV. — Photo

The banking sector is still worth an investment in 2021 on expectations the Vietnamese economy and business community will recover as the pandemic is under control, experts have said.

According to SSI Research, 13 listed banks on the Ho Chi Minh Stock Exchange, which account for 27.4 per cent of the southern bourse’s market capitalisation, posted a 6.6 per cent year-on-year increase in third-quarter total pre-tax profit that climbed to VND29.7 trillion.

If the figure excluded Vietcombank’s 21 per cent year-on-year profit downturn, the others’ pre-tax profit gained 14.7 per cent year-on-year thanks to the strong growth of revenues and lower increases in risk provisions and operating costs.

There was also a big difference between private-equity banks and State-owned lenders. Vietcombank and Vietinbank – two of the three State-owned lenders – saw their risk provisions rise 35-39 per cent year-on-year while private-equity lenders saw the figure fall 10.7 per cent.

SSI Securities Corporation’s director of analysis and investment consultancy Hoang Viet Phuong said the outlook of the banking sector is better than estimated as Viet Nam has done well coping with the coronavirus.

The two outbreaks in Viet Nam in late March and July were quickly put out. Fears had been raised about the ability of the Vietnamese economy to deal with the pandemic, thus lowering economic and business performance forecasts.

Such positivity, followed by good news about banking stocks, is expected to lift the sector and market in the fourth quarter.

Bank stocks have returned to their year-start price levels, which are still attractive and reasonable, Quan Trong Thanh, director of research and analysis at Maybank Kim Eng Securities Co, said.

Local banks have return-on-equity (ROE) ratios of 16-20 per cent while lenders in other regional markets have ratios of 9-11 per cent. The price-to-book value (P/B) ratios among Vietnamese lenders are around 1 while that among regional lenders are 1.2-1.4.

Banks are planning to increase their capital, so they will lure investors’ attention and have a better chance of recording good profits, Thanh said.

“Banks performed well in 2020 on their market-shifting stories. Capital hike will be the focus for bigger banks in 2021," he added.

Some large-cap creditors planning to raise capital include Vietcombank, Vietinbank and BIDV.

Do Bao Ngoc, deputy general director of Viet Nam Construction Securities JSC (VNCS), said the prices of bank stocks have been priced in already.

“They may stall a little in short term, even decline, but in general, they are still growing. Any corrections would be good opportunities for investors.”

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Banks giving news about their asset management plans will also be worth a looking, Thanh said.

Those include Techcombank, VPBank and Sai Gon-Ha Noi Bank (SHB). Asia Commercial Bank (ACB) may also be a good choice, especially after the bank in December switched to the HoSE from the Ha Noi Stock Exchange to enjoy higher possibilities of raising foreign capital.

It is likely ACB shares will be added to the major indices such as VN30, VNDiamond and VNFinlead in HoSE's index review in July 2021. The admission will help the bank stock attract more foreign investors and boost its trading liquidity and stock price.

The bank is also considering selling its stake in ACB Securities JSC, thus boosting its revenue.

According to Maybank Kim Eng, ACB focuses on individual borrowers and small and medium-sized businesses with strict asset valuation procedures.

Shares of Vietinbank (CTG), Techcombank (TCB) and Military Bank (MBB) are also recommended by SSI Securities.

Vietinbank is on its way to paying bonus shares for financial years 2017 and 2018 by the end of the first quarter next year. The total dividend rate is 28.8 per cent.

In addition, the State may cut its stake in Vietinbank to less than 65 per cent. The Ministry of Planning and Investment is drafting a new decision allowing the Government to cut its ownership in banks to 50-65 per cent from the current minimum of 65 per cent.

Phuong said it is likely Vietinbank will be permitted to raise its capital, plus the bank has settled all VAMC bonds.

In addition, low-interest rates help boost demand for corporate bonds. Techcombank has outperformed other lenders in the corporate and government bond market.

Analyst Le Khanh Tung at MB Securities Co said bank stocks will lead the market growth for at least the first half of 2021.

State-owned banks have made big risk provisions for 2020, and they may enjoy a robust year in 2021 after the risks are cleared, he said.

The Government is determined to make huge investment to develop mass infrastructure, thus boosting demand for cheap funding to execute the projects, he said. — VNS

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