FiinPro Talk #6 - Vietnamese Banking Stocks: Investment Opportunities and Risks

On 19 April 2018, FiinPro Talk #6 was organized successfully in HCMC by FiinForm - StoxPlus, with almost 150 participants from investment companies, financial institutions, banks, etc. The conference summarized the Vietnamese banking stocks situation in the last 5 years, and pointed out upcoming opportunities and risks with StoxPlus’s statistic and experts’ analysis.

During the period of 2013-2017, according to StoxPlus, Vietnam has witnessed a significant annual growth of credit outstanding balance (17.2%); and loan outstanding balance from consumer finance companies (66.5%) which were considered as "counterweights" to traditional banking models. Stock price of banking sector also increased by 40% in the first quarter of 2018, while the VN Index was at only 19,3%. This price, on average, is 3 times higher than their book value (P/BV) and 20,3 times higher than Profit (P/E).

This year, the listing plans of TPB, TCB, OCB, FE Credit, etc., are much attractive to market players and investor community, which raises up the question: “How can we utilize this potential sector and minimize risks effectively?”

Via FiinPro Talk #6, high-level guest speakers including Mr. Nguyen Tu Anh - Deputy Director General, Monetary Policy Department, SBV; Mr. Kalidas Ghose - Vice Chairman & CEO at FE CREDIT; Mr. Nguyen Dinh Tung – CEO OCB; Mr. Le Anh Tuan - Deputy CIO and Head of Research at Dragon Capital; and Mr. Nguyen Quang Thuan - Chairman & CEO of StoxPlus had a chance to discuss closely with all of the participants to answer the above question and get deeper investment insights.

FiinPro Talk #6 was organized with subject “Vietnamese banking stocks: investment opportunities and risks”

Main topics and key takeaways are summarized hereunder:

(1) Banking sector landscape - key growth drivers in 2018 and a near future:

“While banks only focus on serving the middle classes, they leave behind 87% of the population who have low monthly income and do not have bank accounts, who are potential consumer finance customers” – said Mr. Kalidas, Vice Chairman & CEO at FE CREDIT.

In general, banks and non-banks in Vietnam are experiencing a joyful story over the last 5 years at all areas of business (retail banking, treasury, fee-based activities). Retail loans has doubled growth pace compared to corporate loans, and retail loan share increased to 37% of total loan book by 2017 (for 18 selected banks), while consumer finance has been growing rapidly and playing a part of parent banks’ story. Both of them have a great potential it is the growth story of banks in coming years and reshaped their strategy focus on this.

(2) Major policies and its implications to banking stocks and IPOs:

Banks posted and expected to realize a significance of earnings from securities trading and investment which is mainly g-bonds and at very low yields, but interest rate risk is important to watch - g-bond yields, interbank rates, FX and CPI.

Mr. Nguyen Tu Anh - Deputy Director General, Monetary Policy Department, SBV forecasts that low yields may not last long, which are risks for banks.

(3) Key investment considerations in listed stocks and upcoming listings:

Overall, banking stocks still have some room to play in 2018. NPL also shows a clear trend of improvement in 2017. Banking stocks currently trading rather not premium to the market average, but if we factor in the VAMC loan, among other adjustments, it is trading at large premium to the market average and regional peers.

Additionally, monetizing depositor database is a key trend now and bancassurance is behind the earnings growth story of many banks. Many banks (incl. TCB, STB, VPB, SHB and MBB) have posted a significant commission income from their partnership with life insurer in 2017. However, only the ongoing commission/sharing form of bancassurance will be recurring.

Pre-listing banks’ valuations are also getting closer to that of listed banks. Opportunities for existing shareholders to realize return but upside potential would be small for short-term investors.

(4) Upside opportunities and risks in selected banking stocks:

Speakers and participants also discussed about 4 key risks that are what if the g-bond yield rises significantly; what the consequences of the revaluation of banks’ investment portfolio are; whether banks solve the undercapitalizing issue; management and major shareholder exits.

FiinPro Talk is a series of seminars organized by StoxPlus to create a sharing channel on topics of great interest to help customers gain access to in-depth information about the market, form their investment ideas or preserve assets as well as to provide opportunities to connect with industry experts. Customers can view the details of StoxPlus's next FiinPro Talk at http://fiinpro.com/Events

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