April 2022, the memory of the steep decline in the stock market became an unforgettable milestone for many investors. After a long period of “finding no bottom”, the market started to recover at the end of 2023. Notably, the group of “king stocks” was not out of the trend, when many banking stocks started to “take off”, even surpassing the historical peak after a difficult period.
According to VPBank Securities’ 2024 Outlook Report, in terms of valuation, both P/E and P/B of the banking industry have not yet reached the average level since 2013, therefore, the industry is still trading at quite an attractive level.
With such valuation, the group of “king stocks” expects more room for price increase in the future, especially stocks that are currently priced lower than the industry average.
Many banks have the opportunity for breakthrough growth from a solid fundamental foundation
According to the Banking Industry Report of MB Securities (MBS), banks with a solid fundamental foundation in 2023 are forecasted to have positive business results in 2024.
Firstly, banks with low cost of capital and CASA advantages such as Vietcombank, Techcombank and MBBank are expected to have sustainable NIM, which can withstand the erosion caused by the reduction of lending rates to compete for credit growth.
Secondly, banks with a credit portfolio that grows well and stably thanks to having their own customer base such as HDBank, Techcombank have many positive prospects in 2024.
Thirdly, banks with strongly improved asset quality, implementing a prudent strategy in 2023 will reduce significant pressure this year, such as VIB, Techcombank, VietinBank.
Notably, HDBank was “chosen” by MBS as a potential bank in 2024 thanks to the expected continued growth in credit demand when focusing on the rural customer segment. According to the audited financial statements, in 2023, outstanding customer loans reached VND 343,400 billion, an increase of 30%, ranking among the highest in the industry despite the difficult credit demand.
Along with credit growth, MBS highly appreciated HDBank’s asset quality control platform which is better than the industry average. Specifically, the individual bad debt ratio is controlled at 1.5%, consolidated at 1.79%; capital safety CAR (Basel II standard) reached 12.6%, equal to 150% of the banking industry’s regulations.
Accumulated in 2023, HDBank recorded pre-tax profit of VND 13,017 billion, an increase of 26.8% compared to 2023. ROA and ROE indicators reached 2.0% and 24.2% respectively, among the leading in the industry.
Many banks with good fundamental foundations are currently being valued at low levels
Many bank stocks are currently trading at P/E valuations cheaper than the industry average
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Outlook for 2024, MBS forecasts that the after-tax profit of the banks monitored will increase by 23.6% thanks to higher credit growth of the Big4 group; NIM slightly increases or remains stable; fee income, gold and foreign exchange trading activities are expected to recover. Notably, some banks are projected by MBS to have top high growth in profit after tax such as: VPB (+90.1%), OCB (+29.3%), HDB (+31.5%), TCB (+26.2%), BID (+23.4%).
However, despite the good results in 2023 and the positive profit outlook in 2024, the market prices of some stocks are still cheap. Statistics on April 12 show that, with an average industry P/E of 13.55 times, stocks with the above characteristics such as HDB are trading at cheap prices (P/E reaching 6.85 times).
Notably, in 2023, HDB stock was among the group with the strongest price increase. The uptrend of HDB continued in 2024, as the stock gained 19% in the first 3 months of the year, being one of the few “king” stocks to reach a peak.
Despite the strong increase in 2024, many securities companies share the view that HDB stock still has great growth potential as there is still room for growth. Accordingly, VNDirect Securities Company gives a target price of VND 29,700 per share for HDB stock, SSI gives a target price of VND 27,700 per share; or MBS gives a price of VND 27,760 per share.
Thus, with a good fundamental foundation and high growth potential, according to MBS, stocks such as HDB, VIB, VCB are expected to have better business results than the industry. Given that outlook, many banking stocks trading at P/E cheap compared to the industry and compared to the expected business results are expected to continue to catch the “green eyes” of investors in the stock market.
