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 again.
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, up 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 halted its bill issuance operations at the end of August 2024 but continued to provide liquidity through the OMO channel and maintained interbank interest rates for overnight terms at relatively high levels in the final days of September 2024 (hovering around 4% and then gradually decreasing)
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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 several others that gain advantages from taking over weak credit institutions like MBB (forecasted at +19.4%) and VPB (forecasted at +24.0%)
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BSC believes that economic growth targets will be the 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.
Additionally, compared to the record level of state treasury deposits held 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 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 substantial budget deficit in the fourth quarter. The forecast of a net increase in foreign currency assets at commercial banks due to the cooling of exchange rates and the usual trend of rising remittances in the fourth quarter to serve the holiday season provides a basis for expecting an additional source of money to flow into the 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.
With the low base of profits recorded in Q3/2023, BSC estimates that the total pre-tax profits of tracked banks in Q3/2024 will reach a high of 20% due 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 Q4/2024 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 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 system’s restructured debt currently stands at 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 debt repayment deadlines 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 should be no significant effect on the 2024 forecast.
Looking ahead to 2025, BSC assesses a positive outlook for bank stocks, with a projected pre-tax profit growth rate of 22% for the tracked bank list. Notably, some banks are expected to achieve exceptional profit growth next year, including CTG (forecasted at +24%), MBB (+20%), STB (+33%), TCB (+22%), and VPB (+32%)
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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 have not yet been reflected in their valuations include ACB, CTG, MBB, TCB, and VPB.
