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 was estimated at 8.53% and 4.79% year-to-date, respectively. These figures remain in line with the State Bank of Vietnam’s (SBV) targeted credit growth rate of 14-15% for 2024. Additionally, with the pressure on exchange rates easing, the SBV has halted its bill issuance since the end of August 2024 but continues to provide liquidity through the OMO channel and maintain relatively high overnight interbank interest rates in the final days of September 2024 (hovering around 4% and then gradually decreasing)
Commenting on this, BSC maintains its projection of 14% credit growth and 10% deposit growth for 2024, in line with the accelerating credit picture. The main driver is expected to be the private sector, centered on banks that benefit from credit limit adjustments following the SBV’s circular in late August 2024, such as ACB (forecasted at +15.6%), HDB (+23.4%), MSB (+19.2%), TCB (+20.0%), and a few others that gain advantages from taking over weak credit institutions like MBB (forecasted at +19.4%) and VPB (forecasted at +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 is worth noting that private bank interest rates are still projected 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 Q2/2024 (the highest in the last two years), the continued month-over-month increase in deposit mobilization and the sharp decline 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 budget deficit in the fourth quarter. The forecast of a net increase in foreign currency assets at commercial banks due to the cooling exchange rate and the usual rise in remittances in the fourth quarter for the holiday season provides a basis for expecting an additional source of money to flow into the 1M market in Q4/2024, alongside private sector credit demand.
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 the tracked banks in Q3/2024 will reach a high of 20% thanks to continued credit growth acceleration 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 Q4/2024 compared to the same period last year.
In early October 2024, the SBV announced and is currently seeking feedback on a draft circular to support customers affected by Typhoon Yagi. According to estimates, the total debt affected by the typhoon 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 has a more supportive nature, allowing for multiple extensions for both performing and non-performing loans and considering indirect impacts, such as those affecting the customers’ partners.
With this supportive policy, the impact of typhoon-related losses 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 an estimated pre-tax profit growth of 22% for the tracked banks. Notably, some banks are projected to achieve outstanding profit growth next year, including CTG (forecasted at +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 relatively undervalued 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 significant surprises. Banks with strong and sustainable growth drivers that are not yet reflected in their valuations include ACB, CTG, MBB, TCB, and VPB.
