How attractive are bank stocks in 2018?

Thanks to the positive results, shares of some banking institutions will become attractive. Photo: ST.

Prosperous

Banking stocks are more influenced by market information, having the spreads and impact that should be paid special attention to in comparison with other sectors, which are considered as stocks that have the power to promote the market. There are 13 of 34 commercial banks in Vietnam listed on the stock exchange. According to market movements in 2017, most of the bank stock prices increased rather than decline, the smaller the bank is, the greater the increase is.

Also in 2017, the stock market has improved, VN Index increased 42%. This growth has a “great contribution” from banking stocks with continuous growth. According to experts, the evolution of stocks in this industry has increased and that is reasonable when considering how the banking industry has flourished. The Financial Market Review Report of the National Financial Supervisory Commission in 2017 noted that the profit of the commercial banking system increased by over 40%; with abundant liquidity, stable exchange and interest rates, total assets of the system is estimated to increase by 17.2% compared to the end of 2016, credit growth is strong, bad debts are handled and there are active process mechanisms.

Therefore, in the stock market many banks have increased sharply. Notably MBB shares of Military Bank have increased significantly since the beginning of the year, so MBB is trading around VND 25,000 / share, while at the beginning of the year it was only VND 13,000 / share. Because the business results of this bank are very good and always belonging to the group of high-profit banks, investors especially assess MB safe when in terms of risk management, and quality of financial products. In addition, high value stocks include CTG of Vietnam Joint Stock Commercial Bank for Industry and Trade, VCB of Vietcombank, BID of Vietnam Joint Stock Commercial Bank for Investment and Development.

...But less optimistic

Despite the great attractiveness of trading and call for investment in banking stocks, there are still many banks that are “hesitating”, and do not want to be listed in the stock market. So according to the plan set out there were 10 banks will listed in 2017, but at the end of the new year, there were only four banks on the UPCom and one listed bank. Is it due to concerns that bank shares will lose the status of “king of stocks”?

Obviously, if looking at the stock market in general, although it is considered as “the king of stocks”, the highest market price does not belong to the banking sector. At present, the highest price belongs to the manufacturing, processing industries such as VNM of Vietnam Dairy Products Joint Stock Company (VND 205,000 / share), SAB of the Corporation of Beer - Liquor (VND 252,000 / share), ROS of FLCOSCO (VND 167,000 / share), etc... Moreover, the momentum of banking stocks is slowing down in comparison with other areas. Even bank shares still traded at par value, including KLB of Kien Long Commercial Joint Stock Bank (VND 9,900 / share), SHB of Saigon - Hanoi Commercial Joint Stock Bank (VND 9,200 /share) and NVB of the National Commercial Joint Stock Bank (VND 7,500 / share).

Although the banking industry’s status of "king of stocks" is showing "shaky" signs, commenting on leading securities market in 2018, Ms. Pham Minh Huong, Chairman of the Board of Directors of VNDIRECT said that in a cycle of global economic growth, finance, basic materials, oil and gas industry are strong and attractive. Although banks still have a lot of risks in terms of management and bad debt backlog, banks have drawn many management lessons in the past year and have had time to hedge against bad debt.

Agreeing with her, according to economist, Dr. Vo Tri Thanh, with the accelerated handling of bad debts, the restructuring of weak banks, the healthy banking system under Basell II, the stock of some banking institutions will become attractive. Meanwhile, the shares of manufacturing industries will be oriented towards export; services, real estate... although it can develop, it is difficult to make a breakthrough as in 2017.

In general, with the positive results that are and will be achieved by the whole banking system, investors still have high expectations in stocks in this sector. Of course, the result depends on many factors, with subjective and objective reasons, especially in the context of domestic economy and the world’s, as they might have many effects. Therefore, investors still need to closely monitor developments to actively respond.