Bank shares rise; analysts stay sceptical

(20-08-2008)

HA NOI — Bank stocks are showing signs of recovery on the back of heavy trading volume on both exchanges and over-the-counter (OTC), or unlisted, trading.

However, analysts are sceptical about how long the trend will last.

Two listed banks, Sacombank (coded STB) and Asia Commercial Bank (ACB) recently rebounded by up to 45 per cent and 64.2 per cent respectively compared to their share prices two months ago.

Yesterday, STB share prices closed at VND28,200, up 9.73 per cent against Friday’s session, and ACB reached VND80,900, up 10.22 per cent.

On the OTC market, bank shares in general have rebounded about 10 per cent after slipping 80-90 per cent or more since the start of the year.

Shares of more than 10 banks are traded on the OTC market. Prices of Vietcombank shares at www.sanotc.com range from VND57,000-58,000 compared to VND29,000 two months ago.

Military Bank shares are trading at about VND22,000- 23,000, up 33 per cent against prices last week.

At Rong Viet Securities (Viet Dragon) yesterday, Eximbank’s shares were traded at VND27,000, up from VND25,000 per share last Friday.

These prices were quite reasonable for short-capital investors, said Tran Thi Bich Phuong from Gia Quyen Securities (EPS).

What drives them up?

Some bankers say the OTC stocks are more likely to increase because of a similar upward trend of the stock exchange.

"The mild recovery of bank shares is following the general up-trend of the stock market, not any other factor. Only God know how long the trend will last!" said Nguyen Thanh Toai, deputy general director of Asia Commercial Bank.

However, observers also believe the easing of the credit crunch, plus regulative changes by the Government and bids by foreign partners for more control of local banks, provided the momentum for the mild recovery.

"Of course, these changes partially improve investor confidence in bank stocks. The easing of the credit crunch is likely to be the most important contributor," said Phan Anh Tuan, securities analyst with VincomSecurities.

However, the "up" trend in these stocks would improve if lending for mortage investments had not frozen because of a number of factors, Tuan added.

Do Hoai Nam, senior analyst with Kim Long Securities, said the mild rebound came at a good time for many investors, considering that the State Bank had paused granting licences to new commercial banks.

This is expected to reduce the competitiveness of existing banks to some extent and to stabilise the volume of bank shares on the OTC market.

The central bank, moreover, has not set a new date to grant licences again as it needs a certain time to adjust the regulations as well as criteria.

This means no more new bank stock will debut, or dilute, the bank stock market in the near future.

Moreover, the central bank has also given the green light for joint-stock banks to buy back their own shares, which is considered important in supporting or raising prices for bank shares throughout the share trading world.

The Government’s regulative adjustments are believed to be creating a stable sentiment among investors. And the stake moves in banks are also said to be momentum for the modest spring-back of bank shares.

"But this is only short-term. When bank bids are completed, prices will back to the original standing if banks don’t perform better," Tuan said.

Bids for bank shares are being made between Techcombank and HSBC, VP Bank and Singapore’s OCBC, ABBank and Maybank (Malaysia), SeABank and Generale Societe (France), Southern Bank and UOB (Singapore).

Foreign investment in several local banks is believed to improve the performance of local banks – from technology to staff quality and shares.

Techcombank last week sold an additional 5 per cent of its holdings to HSBC, increasing its total stake to 20 per cent. Prices of Techcombank shares yesterday were up to about VND28,000-30,000 per share (compared to VND18,000-19,000 each previously).

Nguyen Ho Nam, general director of Sacombank Securities predicted that possibility of bank shares to increase further was strong.

Unfolding risk

While many believe bank shares always have potential, the tightening of monetary policies have definitely resulted in an ongoing slowdown of credit growth - together with other problems.

Sacombank – a good-standing local bank, for example, has to adjust its forecast revenue target from VND2 trillion (US$119.76 million) down to VND1.5 trillion ($89.82 million).

Some sources say that many banks face a serious rise in non-performing loans because borrowers had to borrow at high interest rates. And, while inflationary pressures are still an ongoing fear, the ability to pay back loans on time seems to be the really big question.

Le Xuan Nghia, director of the central bank’s Department for Bank Development Strategy said that given local banks had escaped from a temporary liquidity crisis, a loan crisis would challenge them by the middle of next year.

A retailer holding STB shares, Nguyen Ngoc Dung, countered that: "In any crisis, every bank will be affected. However, for banks running proper and effective risk management systems, such as Sacombank and ACB, losses will be minimised. So, shares of such banks, personally, have a lot of potential."

Phan Anh Tuan from VincomSecurities added that stock investors in Viet Nam did not have a long-term outlook. "They mostly take care of what is happening now," he said.

However, even if people are optimistic about bank stocks, history shows that they can rarely swim against the tide of the whole stock market. — VNS