Revaluation of bank stocks

Despite being assessed as having positive prospects, banking stocks are still at low valuations.

In the stock market, the banking industry accounts for a large proportion of capitalization, significantly affecting the increase and decrease of the VN-Index.

Bank stocks remain under pressure

The VNFINLEAD index has been moving sideways over the past month. This is a basket of 23 listed companies, nearly 94% of which are banking stocks, measuring the fluctuations of financial stocks. This development partly reflects that large bank stocks on the stock exchange are still under a lot of pressure in terms of price fluctuations, especially after a sharp decline in early April in the general context of the market.

Banking is seen as the biggest beneficiary as Vietnam focuses on domestic growth drivers to help drive economic growth. Banks finance nearly all sectors of the domestic economy, lending heavily to real estate and consumer spending - sectors that are forecast to help boost the economy by 2025.

In the stock market, the banking sector accounts for a large proportion of capitalization, significantly affecting the increase and decrease of the index. Shares of a large bank such as Vietcombank's VCB are currently trading in the range of VND56,000-57,000/share, equivalent to the price range at the end of 2023 and down 15% compared to the peak reached in mid-March this year. Similarly, BIDV 's shares, BID, are also around VND35,000/share, down more than 20% compared to the peak at the beginning of this year.

Many bank stocks are still in a downtrend such as TPB (TPBank), SSB (SeABank) when there is no new supporting information. Some stocks have recovered significantly after the decline in early April, but there is no clear upward trend, and they have not returned to the high price range of the past such as OCB, SHB , MSB.

Although some banking stocks have created bright spots thanks to their own stories such as STB (Sacombank), TCB (Techcombank), the overall performance of the banking group has not had a significant breakthrough. The reason comes from business results, especially net interest income under pressure due to narrowing NIM (net interest margin) and pressure on rising provision costs when Circular 02/2023/NHNN on debt extension expired on January 1, 2025 and the trend of bad debt increasing in the first quarter of 2025.

According to FiinTrade's recent assessment, the P/B valuation of the banking industry is at 1.43 times - a rare low in history.

Find opportunities when valuations are low

Improving asset quality is the top priority for the banking industry in the coming time. Experts from Yuanta Securities Company assessed that the asset quality of the banking group will gradually improve with the recovery of the real estate market and the legalization of Resolution 42/2017/QH14. However, investors need to pay attention to the impact of applying IFRS (international financial reporting standards) and US tariffs.

In the past, after each sharp decline, bank stocks have recovered quickly after each sell-off. According to Yuanta experts, bank stocks are still undervalued, currently trading 1 standard deviation below their 10-year historical average. Therefore, there is still room for outstanding bank stocks with their own factors, typically ACB, HDB, MBB, TCB, VCB, VPB.

Besides the impact of support policies, each bank will have its own story to attract investors, especially in the context that banks are trying to diversify non-interest revenue, aiming for business models that bring more diverse sources of revenue in the future.

For example, in addition to HDBank being in the group of commercial banks participating in the restructuring of weak banks and will have increased foreign room, HDB shares can also benefit the most when HDBank does not have a foreign strategic partner. Or VPB (VPBank) is currently having an attractive valuation, trading at a 2025 expected P/B of 0.9x, below the industry median of 1.1x.

Meanwhile, the IPO of Techcombank Securities Company (TCBS), if successful, will increase the valuation of TCB bank shares. Thanks to its outstanding business results, TCBS is estimated to be valued higher than the average of the securities industry, thereby contributing greatly to Techcombank's operations.

In general, most of the TTM P/E (12 months) of the industry groups are lower than the average TTM P/E of 5 years. Besides the securities and real estate groups, the banking group also has a lower valuation than history, with positive growth prospects in 2025.

In the market, long-term institutional investors still have faith in this group of stocks due to their positive outlook. Finnish investment fund PYN Elite Fund said that banking stocks still account for the majority of its portfolio with an allocation of 47% at the end of May.

The banking sector has had a difficult few years with slow profit growth, partly due to issues in the bond market in 2022, as well as lingering effects on the real estate market and investor confidence, said Petri Deryng, head of PYN Elite Fund.

“However, by this year, the overall need for loan provisions will decrease significantly, thereby improving profits accordingly. At the same time, the expectation is that the National Assembly will pass the legalization of Resolution 42/2017/QH14, which will allow banks to process collateral much faster, recording significant additional income,” Mr. Petri Deryng assessed.

In addition, along with the recovery of the real estate market, the asset quality of banks will also improve. The strong promotion of the Government in developing infrastructure, removing legal bottlenecks and merging provinces and cities will better support the recovery of the real estate market in the coming time. This will help improve the quality of bank assets, thereby reducing the pressure on provisioning and boosting profits for banks.

Source: https://baodautu.vn/dinh-gia-lai-co-phieu-ngan-hang-d304296.html