Credit growth 14%, bank stocks increase simultaneously

Banking stocks increased across the board after the State Bank adjusted the credit growth target for the entire system in 2023 to about 14%, aiming to provide more capital for the economy .

Bank stocks break out

At the opening of the trading session on July 11, 11 bank stocks in the VN30 group all increased points even though the stock market had increased quite strongly with nearly 11 points in the previous session (July 10) with positive developments coming from the banking, real estate and securities stocks.

The VN-Index rose by 5 points to 1,154 points at one point, consolidating its highest level in more than 9 months. Liquidity was also quite good after a strong improvement in the first session of the week. The group of individual investors continued to increase their money and overcome the selling pressure of foreign and institutional investors.

As of 10:00 a.m., Vietinbank (CTG) shares jumped by 800 VND to 30,500 VND/share; Vietcombank (VCB) increased by 500 VND to 103,200 VND/share; MBBank (MBB) increased by 350 VND to 21,100 VND/share; Techcombank (TCB) increased by 300 VND to 32,300 VND/share; TPBank (TPB) increased by 300 VND to 18,500 VND/share...

Banking stocks continued to surge after the State Bank of Vietnam (SBV) adjusted the credit growth target for 2023 for credit institutions (CIs) to a system-wide level of about 14% to provide more capital for the economy.

The adjustment of credit growth targets for credit institutions is carried out by the State Bank based on the proposals of credit institutions, the operational situation, financial capacity, governance and ability to expand healthy credit of each credit institution, ensuring liquidity and operational safety of the credit institution system.

In the stock market, investors believe that many banks have been granted the normal room of 14% and some banks are waiting for the State Bank to grant more room, especially the 4 banks receiving mandatory transfers: Vietcombank, VPBank, HDBank and MBBank.

These are banks that have plans to receive banks subject to mandatory transfer with the authorities.

Many banks may have their credit room expanded in the last 6 months of 2023.

The banks selected to participate in the restructuring of weak banks all have healthy finances and great ambitions. In the initial period of receiving compulsory transfer, banks may have to share support resources, but according to many experts in the industry, this will bring great benefits to realize strong growth plans in the future.

Initially, the business results or bad debts of the bank being compulsorily transferred will not be consolidated into the financial statements of the receiving bank.

Meanwhile, the operating network of the bank after the transfer will be expanded and larger in scale. In addition, these banks will receive some priority support from the State management agency, especially credit limits.

High credit limits are very valuable in the context of limited lending room of many banks, while the demand for loans to restore and develop production and business is still forecast to increase in the coming time.

Banking outlook brighter

Banking stocks have recently shown an upward trend amid some forecasts showing that credit institutions' profits are still developing positively.

According to the estimated business results released by SSI Securities, many banks have positive profit growth expectations including: BIDV (BID), Vietinbank (CTG), HDBank (HDB), MBBank (MBB), Sacombank (STB), Vietcombank (VCB), VIBank (VIB).

According to the State Bank of Vietnam, as of June 30, the economy's credit balance reached over VND 12.4 million billion, up 4.73% compared to the end of 2022. This also means that credit grew by 1.56% in June. This is an impressive figure.

The State Bank of Vietnam’s announcement of a credit growth target of 14% is seen as a way to help commercial banks implement their business plans. The State Bank of Vietnam may increase the credit room of some banks after balancing some banks that do not use the credit limit granted. The recent decrease in interest rates also contributes to pushing capital quickly into the economy.

The stock market also performed positively as authorities boosted public investment. In 2023, the Government set a target of disbursing at least 95% of public investment. In a recent move, the Government requested to continue reducing lending rates by at least 1.5-2%, applicable to both new and outstanding loans.

Although banking stocks are performing positively along with the Government's efforts to support economic development, some experts are still concerned about the possibility that bad debt may be pushed into the future.

Ms. Tran Thi Khanh Hien, Director of Research, MB Securities, said that banks are cautious in lending decisions, so bad debt in 2023 can be controlled, but bad debt pressure will increase sharply when the policy of restructuring debt repayment terms and maintaining debt groups expires.

Chief Investment Officer (CIO) of AFC Vietnam Fund Vicente Nguyen believes that, like listed enterprises in general, the banking industry will have differentiation in business results as well as stock prices.

According to Mr. Vicente Nguyen, many challenges still await the banking industry. In the first quarter, bank profits shrank mainly due to low credit growth, high capital costs as well as pressure to increase provisions due to bad debt pressure. Recently, exchange rates have fluctuated strongly, causing pressure to narrow the room for monetary policy expansion.

This CIO believes that the issue that will affect the business results of banks in the coming time is credit growth. Because interest from lending activities accounts for 70-90% of the operating income of banks.

Recently, bank credit has not grown strongly due to the focus on stabilizing operations and ensuring system safety. However, credit growth may be more positive in the last 6 months of the year thanks to lower interest rates, economic stimulus policies, and signs of recovery in the world and domestic economies.

With unprecedentedly low valuations, bank stocks will attract strong capital in 2023? Bank stocks are being valued at historic lows and are considered attractive investments.

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