Customers do transactions at Techcombank (Source: cafef.vn)
Hanoi (VNS/VNA) - Shares offour Vietnamese banks may rise 14-68 percent in 12 months, according to JPMorgan’s Asia Pacific Equity Research.
The New York-based financial institutionsaid in its research that the Vietnamese banks “offered an increasingly rarecombination of high and self-sustaining earnings growth."
“This, with a favourable credit cycle,should lead to significant multi-year returns,” the US bank reported early thismonth.
In addition, high visibility on nominalgross domestic product (GDP) and current account surplus allows “extrapolationof strong earnings and credit growth in Vietnam.”
JP Morgan rated shares of the Joint StockCommercial Bank for Foreign Trade of Vietnam (Vietcombank), the VietnamTechnological and Commercial Joint Stock bank (Techcombank) and the AsiaCommercial Joint Stock Bank (ACB) at over weight and the Vietnam ProsperityJoint Stock Commercial Bank (VPBank) at neutral.
The banks under JP Morgan’s coverage areexpected to deliver 15-21 percent return-on-equity (RoE) ratios in the next twoyears as “they have started making money on both sides of the balancesheet.”
JP Morgan also highlighted favourablecyclical positioning as a defining feature of the Vietnamese bankingsystem, which managed asset quality problems well in 2012-13.
It spoke highly of the creation of theVietnam Asset Management Company (VAMC), which “provided a five-year timelineto write off bad debt” and allowed banks to grow sustainably through beingfunded against VAMC bonds.
Vietcombank, Techcombank, ACB and VPBank wereforecast to record a 12 percent earnings compound annual growth rate (CAGR) for2019-21 on the back of a 16 percent loan CAGR and a 6-13 basis point netinterest margin (NIM) compression, as competition in retail loans should crimpyields.
JP Morgan warned the four banks’ stock ofcapital would appear low at a 12.2 percent capital adequacy ratio (CAR) as theywere “transitioning from Basel 1 to Basel 2.”
Meanwhile, high RoE, limited dividendpayout rates of 0-17 percent and reasonable risk-weighted asset growth of 13-19percent would ensure capital needs are met.
In addition, credit penetration at 104 percentof the revised GDP is high, according to JP Morgan, due to “leverage build-upat State-linked companies with low capital efficiency” and a higher consumerleverage that would limit growth and lead to non-performing loans (NPLs)./.
