VietNamNet Bridge – Foreign investors are selling bank shares in large quantities. Banks are about to undergo a bank restructuring process initiated by the State Bank of Vietnam. All that factors make people think that bank shares are losing their attractiveness. But things are quite different in reality.

It seems quite a surprise that bank share still stay safe from the bad news. However, many strange things have been occurring on the Vietnamese market.

Being one of the most important business fields in the national economy, the banking sector always catches the most special attention from specialists and investors, especially when the government has stated that banking will be one the three key sectors to undergo a violent restructuring process.

The special attention can also be seen in the “hot atmosphere” at the National Assembly’s session and on the sideline of the session. The common worry that a lot of experts have expressed is that banks are facing some big problems.

Governor of the State Bank of Vietnam Nguyen Van Binh said that the profits made by commercial banks are really low if comparing with their chartered capital and total assets. As for a medium scaled bank with the total assets of 50-60 tens of trillions of dong and the chartered capital of 3-5 trillion dong, the profit of 1-2 trillion dong is considered low, at the medium level if compared with Vietnamese enterprises.

One of the big problems of banks is that they have to make high provisions against the risks.

Dang Thanh Tam, a businessman, a National Assembly’s Deputy, also said that that the banking sector’s attractiveness has decreased. Tam said that with 70 percent of population working in the agricultural sector and follows a sustainable development model; banking proves to be not an attractive investment field.

According to Tam, though banks will still play a very important role in the national economy, they would be “less hot”. It will not happen that people rush to hunt for bank shares, the scenery that once happened in the past.

Besides, banks are also facing some other big problems, including the sharp increase of subprime debts, the low liquidity of some banks, and the small scale of banks which lead to the low competitiveness.

All that negative factors can badly influence bank share prices. Some analysts once warned that the bank share prices would decrease, because investors are now no more interested in bank shares – which were once considered “king shares.”

However, in reality, bank share prices, though having been decreasing in the context of the gloomy stock market, have not decreased as sharply as warned.

While the prices of nearly all stocks have been plummeting and the liquidity of shares has been very weak with only tens of thousands of units traded in every trading sessions, the liquidity of bank shares remains very high.

STB of Sacombank, for example, still could see high trading volume in the last 10 trading sessions with 2 million shares traded per trading session, a high proportion if noting that 20-30 million shares are traded at the HCM City Stock Exchange in total.

Meanwhile, about 1 million MBB shares of the Military Bank are traded per trading session.

In the 10 latest trading session, when the stock indexes dropped to record deep lows (the VN Index dropped to 380 points), bank shares such as MBB, STB, ACB, EIB, CTG, VCB all saw more increases than decreases. Especially, the prices of some of the shares once hit the ceiling levels.

This really has much significance if noting that previously, when bank shares were considered “king shares”, there were not many trading sessions, where the share prices hit the ceiling levels.

A lot of questions have been raised about the high prices of bank shares. Why are bank shares still attractive, if many banks are facing weak liquidity which forces them to mobilize capital at the sky interest rates of 20-30 percent? Why bank shares still can be sold well if many banks now have to struggle to collect debts, and many of them have “buried capital” in the frozen real estate market?

Experts explain that people always keep a confidence on the firm position of banks in the national economy.

Ngoc Thao