Bank stocks became the main driver of the VN-Index in September, with the index briefly surpassing the 1,300-point mark. However, strong profit-taking pressure soon pushed it back down.
A number of bank stocks posted strong gains in the past month, including VPB, which rose nearly 12%; ACB, up 6.3%; MBB, up 5.36%; and TCB, which increased by 6.7%.
As of September 27, 2024, credit and deposit growth for the entire system were estimated at 8.53% and 4.79% year-to-date, respectively. These figures remain on track with the State Bank of Vietnam’s (SBV) target of 14-15% credit growth for 2024. Additionally, with the pressure on exchange rates easing, the SBV has halted its bill issuance since the end of August but continues to provide liquidity through the OMO channel and maintain interbank interest rates at relatively high levels in the final days of September (around 4%, gradually decreasing)
Commenting on this, BSC maintains its forecast of 14% credit growth and 10% deposit growth for 2024, in line with the accelerating credit picture. The main drivers are expected to be private groups, including banks that benefit from credit limit adjustments following the SBV’s circular in late August 2024, such as ACB (forecasted +15.6%), HDB (+23.4%), MSB (+19.2%), TCB (+20.0%), and others with advantages from the acquisition of weak credit institutions like MBB (+19.4%) and VPB (+24.0%).
BSC believes that economic growth will be a priority for the regulators in the last three months of the year, especially after the negative impact of Typhoon Yagi. Therefore, they expect the state-owned bank group’s deposit interest rate to remain at its current level until the end of the year, averaging about 4.7% for 12-month terms, in line with the SBV’s direction to support the economy’s borrowing needs. It’s worth noting that private bank interest rates are still forecasted to increase slightly by the year’s end, as mentioned in the previous report.
Moreover, compared to the record level of nearly VND292 trillion in state treasury deposits held by state-owned banks as of Q2/24 (the highest in the last two years), the continued monthly increase in deposit mobilization and the sharp decrease in state treasury deposits at commercial banks from September 2024 to early October 2024 indicate efforts to disburse public investment in the final quarter. This releases a significant amount of money into the economy.
The acceleration of public investment in the last few months of the year often results in a significant fiscal deficit in Q4. The forecast of a net increase in foreign currency assets at commercial banks due to the cooling of exchange rates and the usual rise in remittances in Q4 for the holiday season provides a basis for expecting an additional net cash inflow into the economy in Q4/2024, alongside private sector credit dynamics.
Therefore, BSC believes that money supply growth, including deposit and credit growth, will narrow the phase difference in the coming months, leading to more sustainable growth.
Given the low base of profits recorded in Q3/2023, BSC estimates that the total pre-tax profits of tracked banks in Q3/24 will reach a high of 20% thanks to accelerating credit growth and the projected stability of the industry’s average NIM. The forecast for pre-tax profit growth in 2024 is 16%, corresponding to a 15% increase in Q4/24 year-over-year.
In early October 2024, the SBV announced and is seeking feedback on a draft circular to support customers affected by Typhoon Yagi. According to estimates, the total affected debt is about VND165 trillion, or 1.16% of the system’s credit as of mid-September 2024. In relation to Circular 02, which has a similar nature, the SBV stated that the system’s restructured debt currently stands at VND230 trillion (1.62% of the system’s credit). This draft is more supportive to banks as it allows for multiple restructurings of repayment periods for both overdue and non-overdue debts and considers indirect impacts, such as those affecting customers’ partners. With this supportive policy, the impact of typhoon damage on banks’ balance sheets is expected to be minimal, and thus, there should be no significant effect on the 2024 forecast.
Looking ahead to 2025, BSC assesses the bank stock outlook as positive, with a forecasted pre-tax profit growth of 22% for the tracked bank list. Notably, some banks are expected to achieve outstanding profit growth next year, including CTG (forecasted +24%), MBB (+20%), STB (+33%), TCB (+22%), and VPB (+32%).
In terms of valuation, the growth prospects for next year are not yet reflected in the stock prices, as many banks are still trading at relatively low valuations compared to their historical levels. Therefore, BSC recommends accumulating bank stocks for a medium to long-term perspective, even if the short-term profit growth outlook lacks surprises. Banks with strong and sustainable growth drivers that are currently undervalued include ACB, CTG, MBB, TCB, and VPB.
