Which catalyst helps bank share prices rise in 2021?

09-Jan-2021 Intellasia | Doanh nghiep va Tiep thi | 6:02 AM Print This Post

In the recent 2021 Banking Industry Outlook report of SSI Securities Company (SSI Research), experts assess that banking stocks are still likely to increase in price with many supporting factors. In particular, the first factor is the continuation of the wave to go public, to change stock exchange. Specifically, it is expected that the listing of SeaBank and OCB will be done in first quarter 2021, followed by other names because there are only 21 listed banks out of 31 joint stock commercial banks.

BIDV and Vietcombank’s private placements are expected to progress. At the same time, the sale of subsidiaries can supplement the bank’s capital.

An important factor according to SSI is the last state-owned commercial bank event in the IPO roadmap. Agribank the largest bank in terms of total assets recently proposed an attractive IPO plan. Usually, the IPO process takes more than two years. The proposed new plan includes a two-stage equitisation, in which Agribank will first sell 0.5 percent of its shares to staff, then list it on the exchange. In the second phase, after investors have more time to appraise and or understand more about the bank, the official IPO will be conducted with a higher level of transparency. “This is only a proposal at the moment, although we strongly support this idea. If approved, the proportion of the banking system in the VNIndex will skyrocket in our opinion and this could be the substance a strong catalyst for industry growth, “said the analyst team.

However, there are still many risks such as the possible return of the Covid epidemic and that Vietnam continues to delay reopening which will lead to higher NPLs, as well as higher credit costs. In addition, the risk of bursting the real estate bubble as real estate prices have risen significantly in recent years and intensified the heat in the real estate market.

According to forecasts of SSI Research, bank profits will grow strongly again. In 2021, SSI estimates that the average profit before tax (EBT) of banking stocks will grow 21.0 percent year-on-year. State-owned commercial banks are estimated to have higher EBT growth (up 30%) compared to joint stock commercial banks (up 17.2%) due to low PBT 2020 of state-owned commercial banks (down 6 percent compared to 2019).

Key drivers of PBT growth for 2021 include stronger net interest income growth, thanks to credit expansion and slightly improved NIM. In 2021, SSI estimates that net interest income will increase by 15 percent while credit growth is 12-13 percent yoy. NIM in many banks will improve. The 2021 average NIM of the banks in the study area will increase by 10 basis points to 3.56%.

The bank will continue to benefit from the lower cost of capital as deposit rates drop from 2-2.5 percent in 2020 and a sharp drop takes place in the second half of 2020. SSI thinks deposit rates will fluctuate in a narrow margin in the first half of 2021 and a slight increase (30-50 bps) in the second half of 2021 due to better credit. This low deposit rate environment will continue to help banks save capital costs.

It is expected that by 2021, Covid support package will expire. In 2020, the banking system has exempted/ reduced lending interest rates for 590,000 customers with a total loan balance of 1 quadrillion dong (11 percent of the total outstanding loans of the whole system), reducing lending interest rates from 0, 5 percent 2.5%/ year for nearly 2.3 quadrillion dong new loan balance of 359,000 customers. Approximately 80 percent of support packages were implemented from January 23 to June 30, 2020 and gradually expired in 3rd quarter 2020. The balance will expire in 4th quarter 2020 and 1st quarter 1st 2021.

 

Category: Finance, Vietnam

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