JP Morgan: Vietnamese bank stocks the most attractive in Asean

26-Feb-2021 Intellasia | BizLIVE | 7:31 AM Print This Post

Report of JP Morgan released on February 20th 2021 assessed that the stocks of Vietnamese banks is the best sector to own in Asean.

Out of the four stocks in the research scope, including TCB of Vietnam Technological and Commercial Joint Stock Bank (Techcombank), ACB of Asia Commercial Joint Stock Bank (ACB), VPB of Vietnam Prosperity Commercial Joint Stock Bank (VPBank), and VCB of Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), JP Morgan highly appreciated the price increase potential of TCB, then ACB and VPB.

“We believe that Vietnamese banks have the highest growth rates and Return on Equity in the Asean. The high nominal Gross Domestic Product (GDP) growth and the resilience over the past 12 months show the growth prospect of credit and income in the next few years,” said JP Morgan’s report.

This organisation expects the average Earning per share (EPS) in the period of 2020 2023 of the banking industry of Vietnam to reach 16%. This will lead to the expectation of an increase of eight to 42 percent in stock prices throughout the year, and may be higher in the next three years. Therefore, although the prices of bank stocks have increased by 11 percent compared to the beginning of the year (higher than the six percent increase of the VN Index) and by 30 percent in the past three months, the banking industry is still recommended for raising the shareholding proportion. TCB is the stock that is most interested, followed by ACB and VPB with an expectation of a fairly considerable growth.

JP Morgan expects that the average profits before risk provisioning in the next three years of banks under research will increase by about 25%. This comes from the increase of Net Interest Margin (NIM) of 25 basis points in 2020 and the average outstanding credit growth of 19 percent in the period of 2020 2023. The non-interest income will increase strongly, led by the revenue from fees among banks (bonds in TCB, bancassurance in ACB and VCB, and payment in VPB).

The operating expenses will increase at a Compound annual growth rate of 19 percent in the next three years when banks spend more on digital banking. Vietnam has a fairly high increase in the number of users of banking applications (calculated based on the population) but is still lower in the Asian region. VPB, TCB and VCB has a fairly high market share in application downloads, showing the bank’s strengths in digital services in the domestic. JP Morgan expects them to take full advantage of this.

The SBV sets a credit growth goal of 12 percent in 2020, the limit assigned for each bank may be higher if the bank has the lowest bad debt ratio and banks that have cut lending interest rates for borrowers. JP Morgan said that TCB has the highest Capital Adequacy Ratio (CAR of 16.1%) and the lowest bad debts (0.5%), and will be allowed to expand credit at 20 percent in the period of 2020 2023.

 

Category: Finance, Vietnam

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