ACB Securities, in its latest report, commented that the sharp decline of the stock market recently has made bank shares more attractive.

In late November 2022, bank shares were traded at P/E (price to earnings) of 7.1x and P/B (price to book) of 1.3x.

The stock market recovered later, but fell again in December 2022 and bank share prices were under pressure to decrease. Therefore, the P/E and P/B of bank shares are still around historic low levels.

In fact, according to ACB Securities, the profits of the banking sector may grow more slowly in Q4 2022 and H1 2023 as a result of increased cost and non-net interest income decrease. However, as bank shares are undervalued, they are still attracting long-term investors.

CSI Securities believes that bank shares will remain good investment items for 2023.

The fact that foreign investors have increased bank stock purchases recently is a driving force for the VN Index to stay at the 1,000 point threshold.

At the first trading session of the new year (January 3), the VN Index surged by 37 points and cash flow headed for bank shares.

Prior to that, in the last 3-4 trading sessions of 2022, investors were still cautious. However, cash still flowed to bank shares.

VCB prices increased sharply in the last four trading sessions of 2022 and the share surged by another VND2,600 at the first session of 2023 to VND82,600 per share.

Sharp price increases have also been reported for BID (VND2,600 to VND41,200), STB (VND1,000 to VND23.500), and MBB (VND900 to VND18,000).

Positive prospects in long term

According to Rong Viet Securities (VDSC), in 2023, the banking sector will continue to weather the storm during the real estate downtrend and less positive prospects for import and export. 

However, the resilience of banks will depend on their asset quality and cautiousness.

In the last decade, the banking sector has experienced three main periods.

In 2012-2016, banks entered the period of restructuring after the real estate market was frozen amid difficulties in the global economy.

Later, the banking sector made progress in restructuring, gained achievements in bad debt resettlement and sought non-interest income from insurance and investment activities. At the same time, banks accelerated the use of high technology to cut operation costs in 2017-2020.

In the third period, from 2020 to now, the banking sector has experienced two difficult years because of Covid-19, but it still can gain a ROE (return on equity) of around 20 percent.

In the short term, according to ACB Securities, the changes in policies and positive macroeconomic performance (stable dong/dollar exchange rate, high liquidity) will be a catalyst for bank shares to recover.

Investors hope that disbursement of public investments will speed up in 2023. More money will be pumped into the economy and capital mobilization of the banking system will be better after the stagnant year of 2022. 

There have been signs of deposit interest rate decreases along with overnight interest rate decreases in the interbank market. The capital mobilization channel from corporate bond issuance will no longer be stuck.

Banks have been warned that they may see the NIM (net interest margin) shrink because of deposit interest rate increases. However, large banks such as Vietcombank, BIDV, VietinBank and Agribank still can attract big deposits with low interest rates. 

Many banks enjoy big benefits from large CASA (Current Account, Savings Account) with low costs, and from retail lending.

The State Bank of Vietnam (SBV) has recently instructed commercial banks to slash deposit and lending interest rates to support enterprises and the economy. 

Prior to that, the Vietnam Banking Association called on banks to pay no more than 9.5 percent per annum for deposits.

Staffing activities

Banks carried out staffing activities in 2022, especially in the last months of the year, leading to changes in leaders.

LienVietPostBank (LPB) in December 2022 approved a resolution on appointing Nguyen Duc Thuy to the post of chair of the bank’s board of directors, commencing from December 9. Huynh Ngoc Huy, the predecessor, became deputy chair of the bank.

Prior to that, Thuy was deputy chair of LienVietPostBank. He is the president of Xuan Thanh Group and the owner of Sai Gon Xuan Thanh Football Club.

LPB shares in December were traded at around VND13,000 per share, a decrease of 35 percent from the peak in February.

At the moment when Thuy took office as the bank’s chair, LPB share prices were on the road to recovery after they fell to a low of VND10,000 per share in October.

On the same day (December 9, 2022), the extraordinary shareholders’ meeting of NamABank (NAB) elected people to important positions on the board of directors. Tran Ngo Phuc Vu was appointed to the post of chair of the board of directors. Prior to that, he had been deputy chair of the bank since 2019. The businessman has 30 years’ experience of working at financial institutions and banks in Vietnam.

NAB shares by December had lost more than 50 percent of market value compared from the peak in April. The downward trend continued even when the bank had a new president.

On December 8, NVB released three decisions on high-ranking personnel restructuring. The bank dismissed Duong Thi Le Ha from the post of deputy CEO, and appointed Do Thi Duc Minh and Ta Kieu Hung to the posts of deputy CEOs.

The NVB price then recovered from the bottom in November, traded at VND20,000 per share.

In early September, under the decision of the Sai Gon – Hanoi Bank (SHB) board of directors, Ngo Thu Ha took office as CEO, and Luu Danh Duc as Deputy CEO, in charge of information technology.

In late 2022, SHB prices hovered around VND10,000 per share, a 50 percent market value decrease compared from the peak seen in March.

Also in September 2022, SCB dismissed Truong Khanh Hoang from the post of CEO of the bank.

Hoang left after one year in the post of CEO, since May 2021. He had been deputy CEO in charge of many different segments before becoming CEO.

In July 2022, SeABank decided to dismiss Le Thu Thuy, CEO of the bank, after a 5-year term. In 2022, SSB share prices hovered around VND32,000 per share.

Duy Anh - Manh Ha