There may have been no significant improvements in the profits of banks in the first six months of 2010, the situation nevertheless is considered rather well. In the previous years, banks usually completed profit targets ahead of time. Particularly in 2009, many banks achieved the yearly profit target before entering the third quarter. However, in the first six months of 2010, most banks have only completed about 50 percent of the profit target of the whole year. Although this rate is not low, but it still is a big concern for bankers.
A specialist of a securities company said, bank shares are still having good prospects, the current market characteristics should be carefully put into considerations. Most banks have large shares in circulation (supply of shares includes both additional listed shares and newly listed shares), but the amount of capital for investment is limited.
Even if credit growth reaches 25 percent, market capitalisation would only account for 70 percent of total GDP, and for such figure, the stock market would be able to rise to just about 550 points. With such moderate growth rate, investors tend to focus on small stock codes with small quantity in circulation. Thus, banks shares with large volume would not be attractive.
Another reason, which has made banks shares not to receive attention from investors, is the banks’ pressure on chartered capital increase.
This leads to threats that those stocks would be diluted. In order to have the chartered capital (contributed or granted) at least equivalent to the legal capital of three trillion dong, for not risking the legal status, a large amount of bank shares will be offered, the peak time is most likely to be in late third quarter and early fourth quarter. In addition, while having to increase chartered capital, and at the same time keep growth targets lower than the previous years (being controlled at 25 percent); banks will likely be unable to guarantee the dividend yield expected by investors.
The issuance of additional shares for banks, especially small banks is also not easy. Listing of shares will help increase liquidity for banks shares. However, since the beginning of the year, many businesses have listed their shares and there will be more shares listed towards the end of the year, thus, shares of small banks may not be attractive after being listed.
Concerns on cash flows
The third quarter is expected to be a prosperous time for some sectors such as real estate, maritime transportation, seafood sector, and banking, etc.
Nevertheless, there still are concerns on permanent cash flow in the market. It is very difficult to identify whether this cash flow is high or low, but if looking at the weak liquidity of the recent trading sessions, investors have reasons to be worried. The market still needs a strong force to escape from the current situation. At the end of the session on July 28, the indices of the two stock exchanges continued to drop; VN Index lost 7 points, shrank to 491 points (-1.34 percent). This is the lowest level since May 26. The liquidity of the market fell slightly compared to the previous session, with only 39.67 million shares traded for 1.136 trillion dong. HNX-Index also deeply declined to 152.38 points (-1.64 percent).
Nevertheless, there will be certain advantages in the Vietnam’s financial market towards the end of the year. Banks expect that the economic growth would be higher and inflation would be kept low. In addition, the State Bank would apply more flexible monetary policy in order to assist banks to unfreeze capital, stabilise liquidity. This could stimulate credit growth to the end of the year, when the actual credit balance of the sector has only increased 10.52 percent and the remaining is still relatively high (the yearly target is 25 percent).