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 after caused it to turn downward.
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 on track 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 maintain liquidity injections through the OMO channel and keeps interbank interest rates relatively high 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, revolving around 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 some other names that have advantages due to 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, it is expected that the deposit interest rate of the state-owned bank group will be maintained at its current level until the end of the year, averaging about 4.7% for a 12-month term, in line with the SBV’s orientation to support the economy’s borrowing needs. Note that the interest rates of private banks are still expected to increase slightly by the end of the year, as mentioned in the previous report.
Moreover, compared to the record amount of state treasury deposits held at state-owned banks, which reached nearly VND 292 trillion at the end of Q2/24 (the highest in the last two years), the continued increase in deposit growth and the decreasing state treasury deposits at commercial banks from September 2024 to early October 2024 indicate efforts to disburse public investment in the final quarter, thereby releasing funds into the economy.
The acceleration of public investment in the last months of the year often results in a significant budget deficit in the fourth quarter. The forecast of an increase in net foreign currency assets at commercial banks due to the cooling of exchange rates and the trend of rising remittances in the fourth quarter for the holiday season serves as a basis for expecting an additional source of money to flow into the market in Q4/2024, alongside the momentum from private sector credit.
Therefore, BSC believes that the growth of money supply, including deposit and credit growth, will narrow the phase difference in the coming months, bringing higher sustainability to the growth.
With the low base of profit recorded in Q3/2023, BSC estimates that the total pre-tax profit of the tracked banks in Q3/24 reached a high of 20% thanks to the continued acceleration of 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% growth rate in Q4/24 compared to the same period last 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 VND 165 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 total restructured debt of the system is now VND 230 trillion (1.62% of the system’s credit). This draft has a more supportive nature for banks, as it allows for multiple restructurings of repayment periods for both performing and non-performing loans and considers indirect impacts, such as those affecting the customers’ partners. With this supportive policy, the impact of typhoon damage on banks’ balance sheets is expected to be minimal, and thus, there is no significant effect on the 2024 forecast.
Looking ahead to 2025, BSC assesses the banking stock outlook as positive, with a projected pre-tax profit growth rate of 22% for the tracked banks. Notably, some banks are expected 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 currently 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 significant surprises. Banks with strong and sustainable growth drivers that are not yet reflected in their valuations include ACB, CTG, MBB, TCB, and VPB.
