From the beginning of the year until the end of last week (June 7th), the performance of bank stocks showed divergence, with many stocks rising sharply, but also some stocks rising less than the VN-Index.
Banks, the largest group of stocks by market capitalization on the stock exchange, accounting for over 30% and having a significant impact on the VN-Index, played a fairly good leading role in the first quarter of the year (thanks to the positive business performance in Q4/2023), but then experienced a lull due to lower-than-expected Q1/2024 figures.
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| Non-performing loan ratio of listed banks |
According to Mr. Dang Van Cuong, Head of Brokerage at Mirae Asset Securities, statistics show that the non-performing loan ratio of 27 listed commercial banks increased from 1.96% in Q4 2023 to 2.18% in Q1 2024, despite historically low lending interest rates. The main reasons are the declining debt repayment capacity of individuals and businesses due to income difficulties, fewer new orders, and reduced liquidity in the real estate market, combined with slow credit growth.
With non-performing loans increasing, the industry's non-performing loan coverage ratio decreased from 106% in the same period last year to 86.87% in Q1/2024.
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The Net Interest Margin (NIM) of the banking system has been trending downwards in recent quarters, falling to 3.4% in Q1 2024 from 3.73% in the same period last year. The current downward trend in NIM is mainly due to limited credit growth and banks having to cut interest rates to support customers facing cash flow difficulties. While the cost of capital has tended to decrease, interest income has also declined rapidly in the last quarter. According to Mr. Cuong, all banks experienced a decline in NIM compared to the same period last year, but compared to Q4 2023, some banks showed improvement in NIM, including CTG, VCB, TCB, HDB, LPB, and TPB.
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| Net Interest Margin (NIM) of banks |
Returning to the stock prices of the banking sector, from the beginning of the year to the end of last week (June 7th), many stocks have seen strong and impressive increases, such as LPB up 66%, TCB up 59.2%, MBB up 23%, ACB up 22.5%, VIB up 21.1%, CTG up 21%, while stocks like VCB, STB, BID,SHB … have increased by less than 10%, lower than the performance achieved by the VN-index.
Recently, among the leading stocks, there have been strong upward trends, such as bank stocks, which have also attracted significant investor attention, including STB, CTG, TCB, MSB,VIB , MBB, etc.
Mr. Cuong stated that there are several positive signs for this group. Credit growth as of the end of May increased by 2.41% compared to the end of 2023 (equivalent to a 12.8% increase year-on-year). The credit growth rate is very good after a period of slow growth (only a 0.26% increase by the end of the first quarter compared to the beginning of the year). Thus, from the beginning of the year to the end of May, over 326,800 billion VND in outstanding credit has been injected into the economy , indicating that the ability to absorb capital as well as the demand for loans is improving.
Mr. Cuong stated that, according to available information, credit growth at some banks up to the end of May was as follows: LPB increased by 10.6%, TCB by 9.9%, ACB by 6.7%, CTG by 4%, STB by 3.7%, BID by 2.3%, and MBB by 1.8%; while the two large state-owned banks, VCB and Agribank, experienced negative growth of 0.4% and 0.2% respectively.
Net interest income is a key source of revenue in the operating model of banks; therefore, the strong credit growth at LPB and TCB, as well as the positive business results in the first quarter, are important reasons explaining the outstanding price increase of these two stocks, according to Mr. Cuong. The future outlook for the banking sector will become clearer thanks to factors including:
(1) Faster credit growth and a slight decrease in the non-performing loan ratio are expected as the financial and business environment, along with the recovery of customer demand (both corporate and individual), continues to generate new orders for businesses, and the real estate market is expected to warm up with increased liquidity.
(2) Net Interest Margin (NIM) is expected to improve from Q3/2024 due to lending interest rates rising at a faster rate than deposit interest rates, and higher growth in personal lending at banks in the second half of the year.
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| Valuing several listed banks based on their current P/E and P/B ratios. |
The divergence in business results and financial situations among banks will continue in the coming quarters. Regarding investment opportunities, investors should carefully analyze and invest in bank stocks with higher-than-average credit growth rates and strong risk management capabilities at historically low valuations.
In addition, stories related to the completion of restructuring plans to enter a new growth cycle, cash dividend distribution, or share issuance to increase charter capital are also worth noting at some banks, Mr. Cuong said.
Source: https://baodautu.vn/co-phieu-ngan-hang-phan-hoa-va-co-hoi-d217435.html
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