VCB, BID and CTG shares are hunted

21-Oct-2020 Intellasia | Dien dan Doanh nghiep | 6:02 AM Print This Post

Stocks of three big banks (Big 3) including Commercial Joint Stock Bank for Foreign trade of Vietnam (VCB), Commercial Joint Stock Bank for Investment and Development of Vietnam (BID) and Commercial Joint Stock Bank for Industry and Trade of Vietnam (CTG) have never been eagerly hunted by investors like now, after the Decree 121/2020/ND-CP paved the way for this group of banks to increase charter capital.

In the last week, the stocks of many banks increased sharply, contributing to support the uptrend of the market. In particular, stocks of the Big 3 banks all recorded sharp rise. Typically, CTG price soared to 31,150 dong per share, up by 40 percent compared to the beginning of the year. VCB stock price also increased to 87,000 dong per share, and BID stock price hit 42,200 dong per share with sharp rise in trading volume.

The reason for the significant increase of the Big 3 banks is the government’s issuance of Decree 121/2020/ND-CP which amended and supplemented Clause 2, Article 12 of Decree 91/2015/ND-CP on the investment and management of State capital in enterprises. Accordingly, banks are added to the list of areas that allow additional investment of State capital, applicable to joint stock banks with over 50 percent of State ownership.

This adjustment is the legal basis for CTG, VCB and BID to be allowed to distribute dividends in shares, issue bonus shares from their surplus source in order to increase charter capital, improve Capital Adequacy Ratio (CAR), thereby having more room to expand the growth momentum in the coming years.

It is known that the Board of directors (BOD) of CTG has announced to collect shareholders’ written opinions on the plan to issue shares to pay dividends from the source of after-tax profit. Previously, the 2020 Annual general Meeting (AGM) of the bank approved the plan to distribute the entire remaining profit (after paying taxes and setting up prescribed funds) in shares or retain all profits to increase capital, enhancing financial capacity to increase business activities.

If CTG’s capital raising plan is approved by shareholders, the bank’s shareholders will receive a huge share dividend payment because these dividends will be paid from the retained profits of three years 2017, 2018 and 2019.

As of June 30th 2020, CTG’s shareholder structure includes the State Bank of Vietnam (SBV) with 64.46 percent of ownership, three foreign shareholders including MUFG Bank, IFC Capitalisation Fund and International Finance Corporation with ownership rates of respectively 19.73%, 3.35 percent and 1.64%. CTG’s Trade Union holds 1.15 percent of stake, and the remaining 9.67 percent of stake is held by other shareholders.

According to the Analysis team of Saigon Securities Incorporation (SSI), the profits of banks in the third quarter of 2020 will see prosperity. SSI experts estimated that eight out of the 10 surveyed banks will record better profit growth in the third quarter compared to the same period of last year.

At BID, SSI estimated the operating income before provisions in the third quarter of 2020 at 8.440 trillion dong, up by 4.5 percent compared to the same period of last year. In the first nine months of 2020, this item is estimated at 23.160 trillion dong. Accordingly, the pre-tax profit in the third quarter of BID is expected at 2.4 trillion dong, up by 3.5 percent over the same period of last year.

For CTG, the total operating income will remain the same, the operating expenses are estimated to fall by 23.2%, and the provisions for credit risks are estimated to increase by 28.5 percent compared to the same period of last year. accordingly, the bank’s pre-tax profit is estimated at3.240 trillion dong in the third quarter, up by 3.8 percent over the same period of last year.

For VCB, the pre-tax profit of the third quarter 2020 is estimated to reach 5.1 trillion dong, down by 18.9 percent compared to the same period of last year. SSI stated that the28.6 percent decline in pre-tax profit in the third quarter of VCB is due to the sharp rise in provisioning expenses. In addition, the Total Operating Income (TOI) of VCB is estimated to slightly fall by 1.4%, while the operating income before provisions is estimated to decline by 6.4 percent to 7.3 trillion dong.

With more favourable opportunities in increasing charter capital, and the business growth remains positive despite the pandemic, the Big 3 bank stocks are expected to continue to be sought by investors in the near future.

 

Category: Finance, Vietnam

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