Bank shares rise as foreign ownership ratio ceiling is lifted

27.05.2016

VCB shares of Vietcombank, CTG of VietinBank and BID of BIDV – all three are state-owned banks – initiated the price increase. The prices of the shares increased by 19.5 percent, 10.3 percent and 12.7 percent, respectively, compared to one month ago.

The steady price increases have helped joint stock banks’ prices climb to new levels. STB and ACB, for example, saw prices soaring in the last week’s two trading sessions.
The bank share price increase has surprised analysts, because bank shares always ‘move more slowly’ than other shares.

Analysts believe that there are three reasons behind this.First, most banks have reported satisfactory business results for the first quarter of the year.
Vietcombank, for example, though having to make a high provision of VND1.3 trillion against risk in the first quarter, still could make a post-tax profit of VND2.3 trillion, up by 61 percent compared to the same period last year. 
The bank’s credit growth rate was relatively high at 6.5 percent, while its non-performing loan (NPL) ratio was low at 1.76 percent.

Meanwhile, VietinBank reported the net profit of VND1.923 trillion, an increase of 54 percent over the same period last year. The bank even reported lower NPL ratio than Vietcombank, at just 0.96 percent.
BIDV’s post-tax profit in the first quarter was 10 percent lower than the last year’s same period, at VND1.683 trillion because of the high provision of VND1.9 trillion. 
However, this is not a bad satisfactory result, if noting that it has to admit MHB Bank, while the merger has affected its business performance.
Second, investors have reasons to hope that the State Bank of Vietnam would consider delaying enforcement of the Circular 36 or amending some provisions of the legal document.
The circular imposes strict requirements on the maximum ratio of short-term mobilized capital banks can use for long-term lending.
The National Finance Supervision Council has asked the State Bank to give more time to the banks which have long-term lending proportions higher than the permitted ratios to adapt to the new regulation.

However, analysts believe that the most important reason behind the steady increase of the bank share prices is information about the lifting of the foreign ownership ratio ceiling.

Sources said that Vietcombank and VietinBank are seeking government permission to lift the foreign ownership ratio ceilings to 35 percent and 40 percent, respectively, higher than the currently applied ceiling of 30 percent.

Source: Vietnam.net

Photo: CBR Investment AG