BANKING STOCKS REMAIN ATTRACTIVE IN FINAL QUARTER

Banking stocks are expected to lead the market in the last three months of 2024, supported by positive credit growth expectations and attractive valuations.

Capital started to return to the stock market in the first eight months of the year, driven by expectations of continued interest rate cuts. This shift is encouraging funds to move away from safer channels, such as savings deposits, and into equities.

The VN-Index rose nearly 3 per cent in the first eight months, surpassing 1,280 points before the national day break, and reached 1,250 points on September 16.

Amidst this backdrop, in market strategy reports released in early and mid-September, many experts placed their bets on bank stocks for the last three months of the year as a safe haven.

Vietnam International Securities (VIS) forecast that credit demand will accelerate in the second half of 2024 as interest rates remain low, stimulating borrowing demand and supporting stronger growth in the banking sector.

“Deposit interest rates have shown slight increases at commercial banks, but the rise is not significant, and net interest margins (NIMs) will have a lag of 3-6 months. Therefore, we expect NIMs to slightly decline in the fourth quarter. Listed banks will continue to show profit divergence. Some banks are projected to achieve pre-tax profit growth of 10-15 per cent this year. The banking stocks we consider promising include BIDV, VietinBank, MB Bank, LP Bank, Techcombank, OCB, and ACB,” stated the report.

Banks are also entering a credit race to meet the 15 per cent growth target set by the State Bank of Vietnam. Vietcombank has led the way by implementing 10 rounds of deposit rate cuts and five rounds of loan rate reductions across all individual and corporate customer segments.

Meanwhile, VietinBank has ramped up its digitalisation efforts, applying technology in lending activities such as using big data and AI to analyse customer needs, designing tailored lending solutions for each segment. The bank has also integrated technology into the credit approval process, reducing costs and enabling customers to access capital more quickly.

According to VNDIRECT Securities, the banking sector's non-performing loan ratio is expected to decrease slightly in the remaining months of the year, while the sector's current price-to-book ratio is below its five-year average, presenting an attractive valuation.

“On this basis, VNDIRECT recommends buying MBB with a potential price increase of 15 per cent. Additionally, another recommended banking stock is VPB, with an expected price increase of up to 25 per cent. The recovery in consumer demand will drive strong credit growth for VPB from Q3 onwards. This will help VPB achieve credit growth of 21 per cent, far exceeding the projected 15 per cent industry growth,” VNDIRECT suggested in its report.

Yuanta Research's outlook report for the second half of this year and 2025 also maintains a positive view on banking stocks, with stocks of Vietcombank, Techcombank, ACB, and MB Bank holding the top four positions, according to the capital adequacy, assets quality, management quality, earning quality, and liquidity model.

“The pressure on provisioning may ease, as some banks have already set aside significant provisions, potentially leading to provision reversals in Q4. Banking stocks are currently trading at -1 standard deviation below their 10-year historical average, mainly reflecting concerns about asset quality related to the real estate market. However, we believe the difficulties in the real estate market have bottomed out and will enter a new growth cycle, possibly in the second half of next year,” the report concluded.

Source: VIR