Undervalued banks winning bet for investors

December, 06/2022 - 07:03
The recent declines of the securities market have moved bank stocks to an 'attractive zone'. Banks were trading at a P/E multiple of 7.1 and P/B of 1.3 in late November, equivalent to the lows in March 2020.
A VIB branch. VIB did well yesterday with a gain of 2.34 per cent. Photo baochinhphu.vn

HÀ NỘI — Although banking profits are expected to grow slower in Q4/2022 and in the first half of 2023, experts still have an optimistic outlook on bank stocks in the short term.

ACB Securities said the recent declines of the securities market have moved bank stocks to an 'attractive zone'. Banks were trading at a P/E multiple of 7.1 and P/B of 1.3 in late November, equivalent to the lows in March 2020.

These figures are 38.1 per cent and 29.6 per cent, respectively, lower than the historical averages of the period between 2010 and 2022. As such, bank stocks appear to be a winning bet for long-term investors looking to get ahead of the market.

BSC Securities said bank stocks are trading at a huge discount compared to the previous periods despite banks' good financial positions. On such a ground, the stocks are worth a higher valuation.

However, BSC Securities was also concerned about the 'headwinds' that could hold back the banking system in 2023, including the global economic recession and the rise in the provisioning coverage ratio.

VnDirect said the banking system has improved significantly over the years on the back of Việt Nam's economic growth. With a forecast P/B of 1.0 in 2023, bank stocks appear to be a real bargain for investors.

However, VnDirect was concerned about a falling net interest margin (NIM) caused by mounting costs. The concern is based on its forecast that banks' cost of capital would soar in 2023 amid unlikely-to-rise asset yields.

VnDirect also said banks with higher retail lending and CASA ratios are more likely to be immune to the falling NIM.

In terms of retail lending, VIB and ACB are taking the lead in the banking system with ratios of 87 per cent and 64 per cent, respectively. Regarding current account saving account (CASA), banks on top include Techcombank, Military Bank, and Vietcombank.

Remarkably, Vietcombank is among the few banks that have enhanced CASA ratio substantially since early in the year. The driving force behind the enhancement is its 'zero-fee' policy that has been introduced during the same period.

In the last week of November, 26 out of 27 bank stocks climbed in price, with rates of return reaching beween 10 to 26 per cent.

Of which, Techcombank stock (HOSE: TCB) was the largest gainer of the week, increasing 25.2 per cent in price after five consecutive bullish sessions. SHB stock (HOSE: SHB) followed suit with a gain of 20.4 per cent.

VIB was hitting ceiling prices in two sessions last weak. Its liquidity hit a highest level since January 2017. Other bank stocks also saw a two-digit growth in price, including ABB (17.5 per cent), VCB (16.3 per cent), MBB (16.0 per cent) and LPB (14.1 per cent).

Sector-wide liquidity hit VNĐ16.5 trillion last week, equivalent to around VNĐ3.3 trillion per session, up 77 per cent week-by-week.

On Monday, TCB closed the session at VNĐ29,000, SHB at VNĐ11,250 and VIB at VNĐ21,900 per share. Banks were among the sectors behind the market rally with a gain of 1.34 per cent. — VNS

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