Banking stocks spearhead market rebound

06:00 | 05/11/2020 Economy

(VEN) - Banking stocks are maintaining price stability despite the impact of the Covid-19 pandemic, making them more attractive to medium- and long-term investors.

banking stocks spearhead market rebound

Banking stocks are attractive to investors

Supporting the stock market

After surpassing the 900-point level in September, the VN-Index is expected to reach 940-960 points in October thanks to optimistic business results in the third quarter of the year.

Banking stocks spearheaded the market rebound, led by VPBank (VPB), Techcombank (TCB), Tien Phong Bank (TPB), HDBank (HDB), Military Bank (MBB) and Bank for Investment and Development of Vietnam (BIDV).

In the first days of October, some banking stocks on the Ho Chi Minh Stock Exchange (HoSE) recorded increased trading volume and value, such as Sacombank (STB) with more than 23.2 million shares for over VND360 billion, VietinBank (CTG) with more than 13.3 million shares for nearly VND361 billion, and Military Bank (MBB) with more than 13 million shares for over VND261 billion. In general, banking stocks contributed 13 percent and 17.5 percent to trading volume and value on the HoSE, respectively.

Increased trading volume and value of banking stocks was attributed to banks’ good financial foundation and sustainable income. According to a FiinGroup report, net interest income of listed banks in the second quarter of the year dropped by 7.5 percent compared to the previous quarter as they implemented many financial support measures for customers as well as financial aid packages for those affected by the pandemic. In particular, many banks promoted non-interest activities including fees and services and other activities. As a result, net profit from service activities of listed banks increased by 9.6 percent compared to the same period last year, creating an important growth engine for banks.

Increasing credit demand

As the Covid-19 pandemic comes under control and business operations return to normal, credit demand is increasing.

According to the BIDV Securities Company (BSC), banks are now more cautious about asset quality management and provisional fund establishment. In particular, many banks like Techcombank, HDBank and VIB are maintaining a capital adequacy ratio higher than the requirement of eight percent stipulated by the State Bank of Vietnam (SBV).

Phan Dung Khanh, investment advisory director of the Maybank Kim Eng Securities Company, said banking stocks will continue to spearhead the market because of expected credit growth.

In addition, all commercial banks must be listed on the stock exchange by the end of 2020, in accordance with the restructuring of the stock market and insurance market. The Orient Commercial Joint Stock Bank (OCB), An Binh Commercial Joint Stock Bank (ABBank), Vietnam Maritime Commercial Joint Stock Bank (Maritime Bank) and Nam A Commercial Joint Stock Bank (Nam A Bank) are planning to list their shares on the stock exchange.

Khanh also advised professional investors to invest in banking stocks at the moment given good bank indicators, such as Price to Earning Ratio (P/E) and Price to Book Ratio (P/B). Investors can consider some banks with low valuations and good asset quality, as well as banking stocks with future growth. In particular, they need to focus on banks that prioritize asset quality control rather than short-term profit growth.

Thanh Thanh