The sale of 10pct of Vietcombank’s shares hard to complete in 2018

06-Sep-2018 Intellasia | Vietnam Finance | 6:00 AM Print This Post

Viet Dragon Securities Company (VDSC) said that the possibility for Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank, code: VCB) to complete the issuance of 10 percent of shares in 2018 is very low, since VCB shares are trading at a high price-to-book (P/B) ratio compared to other banks with good assets quality. In addition, buyers of newly issued shares will be subject to a one-year limited transfer.

VDSC has just released a report on Vietcombank (listed on Hochiminh city Stock Exchange (HoSE), code: VCB).

VDSC said that via its discussions with Vietcombank’s board of directors, the bank said it would prioritise credit quality control instead of growth, although Vietcombank was among special cases that can lift the credit growth targets under Directive 04 due to its leading role and its involvement in supporting the restructure of weak banks.

VDSC said that Vietcombank would maintain credit growth target of around 15 percent for 2018.

“We think that Vietcombank’s credit growth in 2018 will depend on the possibility of raising Tier-1 capital. In the base scenario, we forecast VCB’s credit growth at around 16 percent in 2018, which implies credit growth for the second half of the year will be more than five percentage points. Retail loans have been growing more strongly compared to other segments,” VDSC said.

In the first six months of 2018, retail loan growth of Vietcombank reached 20 percent, nearly doubled the growth rate of the whole loan portfolio. VDSC expects the growth momentum to continue in the second half of this year. Therefore, in the second half of 2018, this securities company suggests that Vietcombank’s net interest margin (NIM) will increase slightly. Net interest income will contribute 75 percent of total operating income, but slight reduce by 8 percent over the first half’s result.

Regarding the separate issuance plan, VDSC states that Vietcombank is hoping to soon complete its issuance plan in the third quarter of 2018.

However, according to VDSC, at an average price of 60,000 dong/share, VCB is trading at a P/B ratio of 3.6 times in 2018, which is not very attractive compared to P/B ratios of other banks with good assets quality. In addition, stock buyers will be subject to a one-year transfer restriction.

“These two factors make the issuance unattractive to financial investors, so we think that the possibility that Vietcombank is able to issue all of these 10 percent of shares is very low,” VDSC said.

About the divestment plan, according to the plan set in early 2018, Vietcombank will reduce its stakes in Military Joint Stock Commercial Bank (MB) and Vietnam Joint Stock Export Import Bank (Eximbank) to below five percent and divest all of its capital at Orient Joint Stock Commercial Bank (code: OCB) within this year. In the first half of 2018, Vietcombank withdrew most of its capital at OCB and a third of the capital at Vietnam Airlines (code: HVN) that the bank held. The remaining 1.5 million OCB shares will be put on auction in early September 2018.

“However, the number of OCB shares that are expected to be sold in September is quite small, so the contribution to VCB’s earnings is minor. Also, we believe that it will take Vietcombank more time to divest from MB and Eximbank,” VDSC said.

The income from services, capital-related activities and reversal of provisions will continue to be the main sources of income for the second half of 2018. For the full year of 2018, VDSC expects the profit before tax of Vietcombank will be around 14.7 trillion dong, up 29.2 percent year over year, and net profit will be at 11.7 trillion dong, up 29 percent year over year. The corresponding earning per share (EPS) is 2,749 dong/share.


Category: Finance, Vietnam

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