Bright prospects for bank stocks in 2017

Many commercial banks posted positive earnings in the first quarter of the year, contributing to the rosy outlook for the banking sector in 2017 — Photo cafef.vn

Ten banks are now traded on the HCM Stock Exchange, Ha Noi Stock Exchange and Unlisted Public Company Market (UPCoM).

Top earners include Joint Stock Commercial Bank for Foreign Trade of Viet Nam (Vietcombank), Viet Nam Bank for Industry and Trade (Vietinbank) and Bank for Investment and Development of Viet Nam (BIDV).

Those three banks recorded post-tax profits of VND2.2 trillion (US$97 million), VND2.04 trillion and VND1.85 trillion, respectively. The figures were up 20 per cent, 5.8 per cent and 9 per cent from last year’s first-quarter numbers.

Lower earners included Military Commercial Joint Stock Bank (MBBank), Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) and Viet Nam Export Import Joint Stock Commercial Bank (Eximbank).

Private-equity commercial banks, such as Asia Commercial Bank (ACB), Sai Gon-Ha Noi Commercial Joint Stock Bank (SHB) and Viet Nam International Joint Stock Bank (VIB) also recorded higher post-tax profits in the first quarter.

According to the Department of Statistics and Forecasting under the State Bank of Viet Nam, the banking system’s average growth is expected to rise 13.4 per cent, higher than 2016 growth.

Bank stocks have recorded strong growth since the beginning of the year, with shares of Vietinbank (CTG) rising 23 per cent since December 30, 2016; Eximbank’s shares (EIB) advancing 26 per cent, BIDV’s shares (BID) gaining 18 per cent, and ACB shares jumping 35 per cent.

According to BIDV Securities (BSC), the outlook for bank stocks remains positive due to their higher than expected business results, efforts to handle non-performing loans, more transparent business operations and supporting policies issued by the Government and central bank. BSC said Vietcombank has bought back bad debts from the Viet Nam Asset Management Company (VAMC) while ACB has set a target of settling all bad debts this year.

Bank operations will become more transparent and secure as they cut lending to companies and individuals seeking capital and investments for risky industries, such as real estate. Reducing long-term and middle-term loans using short-term capital would ensure the liquidity and strength of the banking system, BSC said, adding that banks have to be more transparent about their business activities in order to comply with the Basel II standards.

Lending will continue to be the main source of bank earnings as Viet Nam’s economy grows and encourages companies and individuals to borrow money, BSC said.

In addition, investors are counting on Government and central bank decisions to allow local commercial banks to raise the bar for foreign investment in their capital, BSC said.

Recently, the central bank approved the sale of more than 30 per cent of the Sai Gon Commercial Bank to foreign investors.