ACB, LienVietPostBank, SHB benefit when listing on HoSE

24-Oct-2020 Intellasia | NDH | 6:02 AM Print This Post

According to SSI Securities Corporation’s Analysis centre (SSI Research), 2020 was the deadline for joint stock commercial banks to put stocks on the official stock exchanges, under the project ‘Restructuring the stock market and Insurance market to 2020 and orientation to 2025′.

Under legal pressure, smaller banks had started to register transactions on Unlisted Public Company Market (UPCoM) like Viet Capital Commercial Joint Stock Bank (Viet Capital Bank), Nam A Commercial Joint Stock Bank (Nam A Bank) in 2020. Larger banks planned to list directly on Hochiminh Stock Exchange (HOSE), including Vietnam Maritime JointStock Commercial Bank (MSB), Orient Commercial Joint Stock Bank (OCB), Southeast Asia Commercial Joint Stock Bank (SeABank) in late 2020 or early 2021.

According to SSI Research, it was interesting that banks that were not under legal pressure, such as Saigon Hanoi Commercial Joint Stock Bank (SHB), listing on Hanoi Stock Exchange (HNX) for three years) or Vietnam International Commercial Joint Stock Bank (VIB), Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank), registering for the transaction on UPCoM for nearly three years, also planned to switch to HoSE in Q4/2020, despite the adverse market conditions caused by the Covid-19 epidemic.

The need to urge such exchanges might be partly due to competitive pressure, as other tier 2 banks of similar size had listed directly on HoSE. In addition, this might be because of the capital needs, as listing on the HoSE could improve future opportunities to attract capital with better valuations. The capital adequacy ratio (CAR) (Circular 41) of SHB, VIB and LienVietPostBank was 10.36%, 9.69 percent and 8.59%, respectively.

SSI Research believed that there were no significant challenges when listing on HoSE with banks. Disclosure at HoSE was stricter than that at UPCoM. For example, UPCoM only required listed companies to publish semi-annual and full-year financial statements, while HNX and HoSE required quarterly financial statements. The securities company believed that this did not affect LienVietPostBank, VIB and these banks could respond to the changes.

Listing on HoSE could bring many benefits, including the opportunity to raise capital, which was the most prominent factor in the opinion of SSI Research.

The first difference was that banks’ shares would be eligible for margin trading (VIB and LienVietPostBank), thereby improving liquidity. After the exchange, the tickers would be allowed for margin trading after six months from the date of listing.

The second one was that, according to SSI Research, investors would receive better banking shares on the HoSE. The transparency and reliability of corporate information disclosed at HoSE were generally appreciated higher than information on UPCoM. Therefore, companies listed on HoSE were also more well received by investors than UPCoM.

Among 31 joint-stock commercial banks, 10 major banks had been listed on HoSE, while three banks were listed on HNX and seven small banks were on UPCoM. If these banks were all listed on the HoSE, the banking industry’s market cap over total market capitalisation would increase from 27 percent to 30%.

The third point to be mentioned was that large funds could choose to invest when stocks were listed on the HoSE. Some funds were not allowed to invest in UPCoM shares, so the move to HoSE would make VIB and LienVietPostBank accessible by large foreign funds. However, in the case of VIB, this benefit should not be overestimated, as it had reached the limit for foreign ownership.

Based on the above benefits, investors expected the shares to be re-priced. Selling shares in the future to improve the capital adequacy ratio could be done at a better price.

SHB, LienVietPostBank and VIB were agile tier 2 banks in terms of asset size in the banking system, with market shares of loans ranging from 1.6 percent to 3%. VIB had the highest retail lending rate, accounting for about 80 percent of its outstanding loans, followed by LienVietPostBank with about 40 percent and SHB at 21%. This partly explained the net income margin (NIM) ratings of these banks, of which VIB had a NIM of 4%, while LienVietPostBank was 3 percent and SHB was 2.4%.

SSI Research expected that these banks would benefit from the environment of low interest rates and NIM would continue to expand in the coming quarters. However, LienVietPostBank faced more difficulties due to the use of more short-term capital for medium and long-term loans and a decrease in CASA.

In terms of asset quality, SSI Research found that SHB and LienVietPostBank still had some suspected of being problem loans (SHB) or lending a lot to cyclical industries leading to high credit risk (LienVietPostBank).

For SHB, the total bad assets were estimated to account for 53.2 percent of total equity and provision. Meanwhile, this Securities Company found that LienVietPostBank’s loan balance in the construction, real estate and restaurant/hotel industries accounted for nearly 30 percent of the total loan balance or three times of the equity and provision.

 

Category: Finance, Vietnam

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