Bank stocks rising on back of bright prospects

The results of 2020 business and 2021 outlook support the rise of bank stocks

Ending the last session of February, the VN-Index stood at 1,168.47 points, corresponding to an increase of 111.86 points (10.59 per cent) compared to the previous month. The HNX-Index increased by 35.01 points (16.3 per cent) to 249.22 points. The UPCoM-Index also increased 4.56 points (6.33 per cent) to 76.64 points.

Large-cap stocks recovered well in February as only the NVL ticker of Novaland decreased by 0.7 per cent. Meanwhile, as many as 14 other stocks in this group increased by over 15 per cent. The shares of VPBank (VPB), rose the most among the top 30 by market capitalisation with over 33 per cent. Following that, Thaiholdings (THD) also increased by 26 per cent and was a key factor helping the HNX-Index continue to break out recently.

February was also a good month for banking stocks as, besides VPB, the stocks of Vietnam International Commercial Joint Stock Bank (VIB), Asia Bank (ACB), Techcombank (TCB), or Vietinbank (CTG) also increased by over 20 per cent.

Particularly, the last trading week of February recorded a rise in most bank stocks. At the price of VND33,000 ($1.44), Asia Commercial Bank (ACB) was the strongest increase with nearly 9 per cent. Military Bank (MBB) led in liquidity with nearly 72.1 million shares. Military Bank shares closed the morning session at VND28,200 ($1.23) a share.

Vietnam Prosperity Bank (VPB) reached VND40,800 ($1.77) while Techcombank (TCB) reached VND40,200 ($1.75), Vietnam International Bank (VIB) hit VND43,200 ($1.88) a shares, and HCMC Development Bank (HDB) increased to VND26,200 ($1.14) per share. Notably, LienViet Post Bank (LPB) hit the ceiling price on March 1, recording liquidity of over 36 million shares and closing the session of March 2 at VND16,100 (70 US cents) a share.

PYN Elite Fund said that the VN-Index can completely increase to 1,800 points in 2022 with favourable macroeconomic factors, including high GDP growth and still attractive market valuation compared to regional countries with the potential to be upgraded to the emerging market status. Once the upgrade is confirmed, banking stocks will lead the rise.

In the "Vietnam – Asia's new success story", PYN Elite expressed the belief that the prospects of Vietnam's banking industry in the coming years are very positive.

“Bank shares have benefited from negative price movements over the past few years. During this time, we have sharply increased the proportion of banking stocks in our portfolio to nearly 40 per cent. We believe that these banks will have strong growth in the next few years and at the same time profit growth will be strong,” shared PYN Elite.

One of the factors that help banking stocks recover and continuously increase in price is the result of 2020 business and 2021 outlook of the banking and finance industry.

Banks continue to benefit from the lower cost of capital as deposit rates have fallen from 2 to 2.5 per cent in 2020 and a sharp decline in the second half of 2020 extends to 2021.

Besides, under Circular No.01/2020/TT-NHNN, in the fourth quarter of 2020, restructured debt began to decline in the group of listed banks.

Specifically, the ratio of restructured debt to total outstanding loans at some listed banks has decreased from 2.6 per cent in the third quarter of 2020 to 2 per cent in the fourth quarter of 2020.

According to an expert at SSI Securities JSC, the profit of banks in 2020 can be managed more than expected at the beginning of the year. The company estimated that the average earnings before tax of banking stocks will grow 21 per cent on-year.

The 2021 strategy report of VNDirect Securities JSC forecast that the profit of banks will increase in 2021. VNDirect expected the investment disbursement rate will continue to be high and the State Bank of Vietnam will maintain its monetary policy to promote economic recovery and increase signals.