Bank stocks became the main driver of the VN-Index in September, with the index surpassing 1,300 points at one point. However, strong profit-taking pressure soon after caused it to turn downward. A series of bank stocks maintained their strong upward momentum in the past month, with VPB up nearly 12%; ACB up 6.3%; MBB up 5.36%; and TCB up 6.7%…
As of September 27, 2024, credit and system-wide mobilization growth are estimated to have reached 8.53% and 4.79% year-to-date, respectively. These figures remain on track with the State Bank’s credit growth target of 14-15% for 2024. Additionally, with exchange rate pressures easing, the State Bank has stopped 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 last days of September 2024 (hovering around 4% and then gradually decreasing)
Commenting on this, BSC believes that this is consistent with the picture of accelerating credit growth. BSC maintains its forecast of 14% and 10% for credit and mobilization growth in 2024, respectively. The main driver is expected to be the private sector, centered on banks that benefit from credit limit adjustments following the SBV’s document 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 takeover of weak credit institutions like MBB (forecasted at +19.4%) and VPB (forecasted at +24.0%)
BSC believes that economic growth targets will be the priority of 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 state-owned banks will be maintained at the current level until the end of the year, averaging about 4.7% for 12-month terms, 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.
In addition, compared to the record amount of state treasury deposits at state-owned banks, reaching nearly VND 292 trillion at the end of Q2/2024 (the highest in the last two years), the continued increase in mobilization growth and the decrease in state treasury deposits at commercial banks since September 2024 indicate efforts to disburse public investment in the last months of the year, thereby releasing a significant amount of money into the economy.
The acceleration of public investment in the last months of the year often results in a large budget deficit in Q4, and the forecast of net foreign asset growth at commercial banks due to the cooling down of exchange rates and the trend of increasing remittances in Q4 to serve the holiday season is the basis for expecting an increase in money supply to the economy in Q4/2024, along with the momentum from private sector credit.
Therefore, BSC believes that money supply growth, including both mobilization and credit growth, will narrow the gap in the coming months, bringing higher sustainability to the growth.
With the low base effect of profit in Q3/2023, BSC estimates that the total pre-tax profit of tracked banks in Q3/2024 will reach a high level of 20% thanks to the continued acceleration of credit growth and the expected 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 Q4/2024 compared to the same period last year.
In early October 2024, the State Bank announced and is seeking feedback on a draft circular to support customers affected by Typhoon Yagi. According to estimates, the total debt affected by Typhoon Yagi 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 the same nature, the State Bank 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 rescheduling of both principal and interest for both current and overdue debts 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 material impact on the 2024 forecast.
Looking into 2025, BSC assesses the outlook for bank stocks as positive, with a forecasted pre-tax profit growth rate of 22% for the tracked banks. Some names that BSC expects to record outstanding profit growth next year include 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 trading at relatively low valuations compared to their historical levels. Therefore, BSC recommends accumulating bank stocks for a medium and long-term investment horizon, even if the short-term profit growth outlook does not hold significant surprises. Banks with strong and sustainable growth momentum that have not yet been reflected in their valuations include ACB, CTG, MBB, TCB, and VPB.
