Opportunities in the last months of the year are forecast to lean towards VN30 stocks, of which banking stocks account for a large proportion. Photo: Duc Thanh. Graphics: Dan Nguyen

Bank stocks "bright" in the second half of the year

According to Mr. Barry Weisblatt David, Director of Analysis (VNDirect Securities Corporation), banking is one of the few sectors that investors should pay attention to from now until the end of the year. Although the quality of banking assets has declined recently, it is likely to recover in the coming months, when the Vietnamese economy improves. In addition, the prospect of credit growth exceeding the target, attractive stock valuations... are factors that make the king stock attractive.

According to analysts, in the last months of the year, opportunities will lean towards stocks in the VN30 group (in which, banking stocks account for a large proportion). Along with real estate, banking stocks are two pillars of the VN-Index. However, real estate stocks currently do not see a way out, while banking stocks are expected to maintain their profit growth momentum thanks to the industry, with NIM tending to expand when mobilization costs remain low, lending interest rates are unlikely to decrease further.

“The banking group will likely still lead the market in the last months of 2024, as the economy's expanding demand will help credit growth in 2024 reach the target of 14-15%. At the same time, the scale of bad debt will decrease slightly by the end of the year, when banks have a better position in terms of pre-provision profits than in 2023 to continue to absorb and clean up the balance sheet, the recovery of economic activities will help reduce the pressure on bad debt formation and help speed up the progress of handling collateral assets of bad debts,” said an analyst at VDSC Securities Company.

In the second quarter of 2024, banking is one of the industries that maintained profit growth. The second quarter of 2024 profit of listed banks increased by 22.6% over the same period. According to ACBS Securities Company's forecast, the pre-tax profit of commercial banks in the monitoring portfolio for the whole year of 2024 will increase by about 20% over the previous year.

ACBS analysts believe that industry-wide credit growth could reach 15.4% in 2024. Credit demand has grown for four consecutive months, especially personal lending, which has begun to recover after being flat throughout 2023. NIM in the second quarter of 2024 of listed commercial banks increased by 10 basis points compared to the previous quarter and increased by 12 basis points compared to the same period, to 3.76%. Although input interest rates are unlikely to decrease further, lending rates are at rock bottom and are no longer under pressure to decrease further. It is forecasted that industry-wide NIM will remain at this level in the coming quarters.

The banking industry's positive growth prospects are the driving force supporting the king stock price in the second half of the year. Photo: D.T

There will be no breakthrough growth.

Although the profit outlook is better than many other industries, in reality, bank profits are also strongly differentiated. The number of banks with outstanding profit growth is not much. Although bank stock valuations are quite attractive, they are not cheap. Therefore, only banks with their own "stories" are attractive.

We expect strong credit growth to boost banks’ earnings growth. We forecast that the industry’s credit growth this year will exceed the target of 15%. In addition, the possibility of a weakening USD in the coming time will reduce pressure on exchange rates and interest rates - factors that can affect credit growth. Currently, banking stocks are still trading below the attractive P/B of 1.7x, slightly lower than the 5-year average.

Mr. Barry Weisblatt David, Director of Analysis (VNDirect Securities Corporation)

Not to mention, the asset quality of the entire industry is declining. By the end of the second quarter of 2024, more than 80% of banks recorded an increase in bad debt compared to the end of 2023. The absolute bad debt balance of banks increased by more than 20% compared to the end of last year. This figure may increase further in 2025, when the debt extension regulation expires at the end of 2024. While bad debt increases, bad debt coverage is decreasing. Currently, the bad debt coverage ratio of the entire industry is only 81.5%, a sharp decrease compared to 99% at the end of last year.

The above factors make it predicted that bank stocks will continue to lead the market in the last months of the year, but it will be difficult to have breakthrough growth.

An interesting point of the banking stock line is the development of US politics. Ms. Tran Thi Khanh Hien, Director of Research (MB Securities Company - MBS) said that Wall Street investors are expecting Mr. Donald Trump to be elected President of the United States. Previously, under Mr. Trump's administration, stocks of some industries grew well, such as finance and real estate. In Vietnam, during that period, banking stocks also had good developments in the market. It is not impossible that history will repeat itself if Mr. Trump is re-elected President of the United States.

Overall, Ms. Hien believes that the stock market from now until the end of the year has many optimistic factors, such as interest rates increasing, but not increasing too much, the economy is recovering, leading to a recovery in profits of listed enterprises, the Fed is about to cut interest rates... However, investors must also be wary of inflation risks, exchange rate pressure and the ongoing net withdrawal pressure of foreign investors.