Good outlook for bank stocks

13-Mar-2021 Intellasia | Dau tu Online | 5:02 AM Print This Post

Banks’ profits in 2021 are assessed very positively, when the epidemic is under control and credit increases. That is an important premise for bank stocks to rise and lead the market.

Huge dividend payments

This year, banks only distribute dividends in shares instead of both in cash and shares as in previous years. unlike other industries, banking is a conditional business, so credit institutions (CIs) must comply with the regulations of the State Bank of Vietnam (SBV), including the dividend policy. Along with other cost reduction solutions, the non-cash dividend payment will help CIS have more resources to further reduce lending interest rates, supporting millions of customers hit by the epidemic.

In 2020, Orient Commercial Joint Stock Bank surpassed its set targets when achieving 4.414 trillion dong of pre-tax profit. Therefore, the bank’s Chair of the Board of directors (BOD) Trinh Van Tuan said that the bank plans to increase its charter capital b about 25 percent and pay dividends at a ratio of 25 percent in shares.

According to information announced by Vietnam International Commercial Joint Stock Bank (VIB), at the Annual general Meeting (AGM) to be held on March 24th, the bank will submit shareholders a capital increasing plan in the form of distributing bonus shares from equity sources and offering shares for sale. The VIB’s charter capital after this plan is expected to be about 16 trillion dong, ensure optimal conditions for the bank’s total asset growth in 2021 and meeting the safety ratios in business.

In 2020, the consolidated pre-tax profit of VIB was 5.801 trillion dong, up by 42.1 percent compared to 2019, 29 percent higher than the plan.

Meanwhile, the pre-tax profit of Asia Commercial Joint Stock Bank (ACB) reached nearly 9.6 trillion dong. This is the basis for the bank to pay dividends at no less than 30 percent in shares in order to increase its charter capital.

According to Maritime Commercial Joint Stock Bank (MSB), the bank’s pre-tax profit in 2020 was 2.5 trillion dong, up by 94 percent over 2019 and equivalent to 174 percent of the set plan. Thus, the bank leaders said that VIB will propose a plan to distribute dividends at a minimum of 15 percent at the bank’s AGM to be held in the first quarter of 2021.

Good prospects

The “Vietnam — Asia’s New Success Story” report by PYN Elite Fund mentioned that the prospects of Vietnam’s banking industry in the coming years are very positive.

PYN believes that with favourable macroeconomic factors such as high Gross Domestic Product (GDP) growth, attractive market valuation compared to other countries in the region, and a potential to be upgraded to an emerging market, the VN Index can increase to 1,800 points by 2022. At that time, bank stocks will lead the rise.

“We have significantly raised the proportion of bank stocks in our portfolio to nearly 40%, and believe that these banks will see strong growth in the next few years,” said PYN.

Meanwhile, the report on the banking industry outlook in 2021 of BIDV Securities Company (BSC) stated that in the group of listed banks, the outstanding loans restructured under Circular 01/2020/TT-NHNN started to decline in the fourth quarter of 2020. Specifically, the proportion of restructured loans on total outstanding credit in some listed banks dropped from 2.6 percent in the third quarter of 2020 to two percent in the fourth quarter of 2020. According to BSC, the pre-tax profit of the entire industry this year will grow strong at 28%, mainly thanks to a credit growth of 14%. In addition, interest rate level will move sideways and the pressure of provisioning for risks will decline.

The research team of Saigon Securities Incorporation (SSI Research) forecasted the average pre-tax profit of bank stocks to rise by 21 percent compared to 2020. State-owned banks will record higher pre-tax profit growth (up by 30%) compared to private joint stock banks (up by 17.2%), because the pre-tax profits of state-owned banks were low in 2020 (down by six percent compared to 2019). According to SSI Research, the main driving forces for the pre-tax profit growth this year are the stronger net interest income (thanks to the credit expansion) and the slight improvement in Net Interest Margin (NIM).

It is estimated that the net interest income of banks will increase by 15 percent while the credit growth will be 12 -13 percent compared to 2020.

However, from a different perspective, a financial analyst Phan Dung Khanh said that bank stocks are seeing a strong differentiation among banks. In addition, the rising risk provisioning pressure will also affect the business results of banks in 2021. Therefore, investors must be cautious before pouring capital.

 

Category: Finance, Vietnam

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