While the benchmark VN-Index climbed 16 per cent in 2016, all of the nine listed banks saw their prices decrease last year.

Lender BIDV (BID), the third biggest bank by market value, was the largest loser with the stock price declining by over 31 per cent for the year.

The two biggest banks, Vietcombank (VCB) and Vietinbank (CTG), both slipped 19 per cent.

Others, including Military Bank (MBB), Eximbank (EIB), Sacombank (STB), Asia Commercial bank (ACB), in addition to Sai Gon-Ha Noi Bank (SHB) and Nam Viet Bank (NVB), decreased between 10 per cent and 28 per cent.

The most expensive price for a bank stock was just around VND35,000 (US$1.54) for a share of Vietcombank. Prices of BIDV, Military Bank, Vietinbank and ACB were around VND14,000-VND17,000 each, while others were traded below VND10,000.

“After leading the stock market rally two years ago, prices of bank stocks have gradually reduced to the lowest range since 2015 despite positive business results in nine months of 2016 that implied a good year,” Lam Nguyen, a stock analyst at Viet Dragon Securities Company, wrote in a sector’s report.

According to the report, valuations of banking stocks, which are illustrated in the Price-to-Book (P/B) ratio and Price to Profit Prior Provisions (P/PPOP) ratio, have decreased to levels of 2011-2012 period when the banking sector was more volatile and began to implement restructuring.

Explaining the “cold shoulder” of investors to bank stocks, Lam attributed it to strict supervision of the central bank to the cash dividend policy of banks as well as their pressure to deal with bad debts and increased capital efficiency and profitability.

However, the market seemed to underrate the prospect for bank stocks compared to their actual performance and bank stocks are expected to make a comeback this year thanks to positive growth forecast.

Except Sacombank and Eximbank, the other six banks saw their nine-month net profits in 2016 grew over the same period of the previous year, of which net profits of Vietcombank rose most by 36 per cent, ACB up 14 per cent, and Vietinbank over 13 per cent.

Excluding Eximbank, the non-performing loan ratio of the other seven banks was less than 3 per cent as stipulated by law.

According to Ngo Hoang Long, stock analyst at Viet Capital Securities Co, asset quality of banks in the long term will gradually improve while credit growth is forecast to remain relatively high this year which presents an opportunity for the recovery of bank stocks.

The State Bank of Viet Nam’s estimated credit possibly expanded by 18.5 per cent for the whole of 2016.

Some to have better opportunity

Both reports, of the Viet Dragon Securities Co (VDSC) and Vietcombank Securities Co (VCBS), have rated higher growth potential for Vietcombank and ACB thanks to their good asset quality and high profitability.

The VDSC report showed that the PB valuation of Vietcombank and ACB is about 30 per cent higher than that of similar banks in the region with the same profitability of Return on Equity (ROE), while that of BIDV, Vietinbank and Military Bank is slightly lower than the regional banks.

Meanwhile, VCBS estimates high growth for both banks with pre-tax profits of Vietcombank likely to rise e 36.8 per cent year-on-year to almost VND12.1 trillion in 2017, while that of ACB likely to grow 21.6 per cent to VND1.95 trillion.

Viet Capital Securities has raised its rating on Vietinbank and Military Bank to ‘positive’ status and said these banks are trading below their fair value. – VNS