Vietcombank plans to sell 6.5% stake to foreign partners in early 2024?

According to Donghai

Investing.com – At its annual general meeting in April 2023, Vietnam Foreign Trade Joint Stock Commercial Bank (HM:) approved a plan to privately issue 6.5% of its capital to foreign investors. At the time, Vietcombank said it was implementing procedural steps and had stopped at hiring a financial advisory firm. Vietcombank is expected to offer private placements to foreign partners between 2023 and 2024.

Yuanta’s analysis report shows that Viet Tong Bank’s preliminary pre-tax profit in the fourth quarter of 2023 was 11.7 trillion VND, an increase of 29% from the previous quarter, but a decrease of 6% in the same period. Pre-tax profit in 2023 initially reached VND 41.2 trillion, a year-on-year increase of 10%.

In its 2024 business plan, Vietcombank aims to achieve pre-tax profit growth of at least 10%. The bank targets total asset growth of at least 8% and credit growth of at least 12% over the same period. This credit growth rate is well below the industry-wide target of 15% set by the State Bank of Vietnam in 2024.

Vietcombank’s total outstanding debt was VND 1.27 million, a year-on-year increase of 10.6%, which was well below the industry average of 13.5%. In 2023, Vietcombank’s deposits increased by 12.1% to VND 1.41 million. The preliminary ROE reaches 21.7%, and the ROA in 2023 is 1.78%.

The bad debt ratio (NPL) of Vietnamese commercial banks was 0.97%, a decrease of 24 basis points from the previous quarter and an increase of 29 basis points year-on-year, still at the lowest level in the industry.

Vietcombank aims to keep the bad debt ratio below 1.5% by 2024. At the end of the fourth quarter of 2023, the debt ratio of Group 2 was approximately 0.42% (a decrease of 22 basis points from the previous quarter and an increase of 6 basis points year-on-year).
At the end of the fourth quarter of 2023, the bad debt coverage ratio (LLR) dropped to 185% (down 85 basis points from the previous quarter and 47 basis points year-over-year).

Yuanta predicts that reduced provisions and increased fee income are the two main factors for Vietnamese commercial banks’ profits in the fourth quarter of 2023. Vietcombank previously said it would record part of the prepaid expenses from its exclusive bancassurance agreement with FWD in the fourth quarter of 2023.

VCB’s LLR ratio declined despite lower bad debts. VCB continues to reduce provisions to help grow profits. Vietcombank’s net interest income is likely to be another driver of profit growth in the fourth quarter of 2023. Credit growth in the first nine months of 2023 was only 3.9% compared with the beginning of the year, but the full-year credit growth rate in the fourth quarter of 2023 increased by 6.7 percentage points, a year-on-year growth of 10.6%. Furthermore, Vietcombank’s capital mobilization costs are likely to fall starting in the fourth quarter of 2023, and this is likely to happen for other banks as well.

In addition, the asset quality of Vietnamese commercial banks remains stable, with a bad debt rate of less than 1%. Although the LLR ratio continues to decline, it remains at a high of 185%.

Vietcombank’s 2024 credit growth and pre-tax profit targets appear conservative. Therefore, Yuanta predicts that Vietnam Commercial Bank’s credit growth will reach about 15% in 2024, far exceeding the bank’s target of 12%.

In 2024, a catalyst for VCB could come from the bank’s planned sale of a 6.5% stake to a foreign partner, which is expected to be completed in early 2024.

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