Henig: Bank stocks to flourish in 2023
Bank profits are forecast to be the bright spot in the fourth quarter 2022 financial report season, which takes place after the Lunar New Year.
HÀ NỘI — Bank profits are forecast to be the bright spot in the fourth quarter 2022 financial report season, which takes place after the Lunar New Year. This will help bank stocks flourish.
Although the financial statements for the fourth quarter of 2022 have not been announced, according to analysts’ forecasts, in 2022, the picture of bank profits will have a strong divergence, along with the return of the commercial banking group with State capital. After two years of “holding” growth to support customers affected by the COVID-19 pandemic, the profit of this banking sector has increased sharply again.
By the end of 2022, Vietcombank’s pre-tax profit reached nearly VNĐ36.8 trillion (US$1.6 billion), an increase of 39 per cent compared to 2021. This figure at BIDV was VNĐ22.56 trillion, an increase of nearly 80 per cent and at VietinBank was VNĐ20.5 trillion, an increase of 21.5 per cent compared to 2021.
Credit poured into priority areas, interest rates controlled at a reasonable level, and good asset quality are the reasons why State-owned commercial banks are granted more credit room by the State bank, thereby improving business results. In 2022, the credit of these banks all increased sharply, while bad debts were strictly controlled.
By the end of 2022, BIDV’s bad debt ratio was only 0.9 per cent, bad debt coverage ratio reached 245 per cent, the highest level in recent years, and the balance of the risk reserve fund was up to VNĐ40 trillion. At Vietcombank, the bad debt ratio was only 0.67 per cent and the bad debt coverage was also above 465 per cent. At VietinBank, bad debt was also only 1.2 per cent, bad debt coverage ratio reached approximately 190 per cent, up 10 per cent compared to 2021.
The private joint stock commercial banks have not yet announced their profits, but it is forecast that the top banks will still maintain a positive growth rate, especially those with not too large corporate bond outstanding loans. Meanwhile, small joint stock commercial banks and banks with large bond outstanding loans are likely to see lower profits in the fourth quarter of 2022.
A recent survey by the State Bank of Việt Nam showed that business results of many credit institutions in the fourth quarter of 2022 did not meet expectations. However, 80 per cent of credit institutions predict that the overall business situation in 2022 will improve compared to 2021.
According to VNDirect analysts, in 2022, the banking industry’s profit increased by about 32 per cent. In 2023, the banking sector’s profit growth will decelerate, growing at only about 10 per cent due to slowing credit growth, narrowing net profit margin (NIM) and rising credit costs. Even so, opportunities are still open for banks with cheap valuations, healthy asset quality, high capital adequacy ratio, healthy credit structure, and restructuring. These will be the banks prioritised by the State Bank in the credit room grant in 2023.
Nguyễn Hoài Phương, Investment Director, who runs the Việt Nam Market Access Equity Fund (VESAF) under VinaCapital, said that in 2023, the VESAF Fund will consider increasing the proportion of bank stocks, especially banks with competitive advantages in terms of liquidity ratios, diversified loan portfolios and good risk management.
In 2022, banking stocks went through a turbulent period, with only two stocks increasing, namely Vietcombank (VCB) and Bank for Investment and Development of Việt Nam (BID), 25 out of 27 stocks declined, with some decreased by more than 50 per cent. The liquidity of bank stocks also dropped sharply. Even so in 2023, banking stocks are expected to lead the rising wave again after hitting 10-year lows in 2022. However, most likely, the market will have challenges in the first half of 2023, before growing in the second half of the year.
Analysts appreciate banks that have a high proportion of retail lending and demand deposits, or current account savings account (CASA), as well as good liquidity buffers and risk provisions.
In the first week of 2023, bank stocks traded actively. Lê Đức Khanh, analyst at VPS Securities Company, said that it is still too early to judge the growth trend of bank stocks, but most likely, the banking group is leading the market to 1,060 – 1,080 – 1,100 points.
— VNS LINK
Henig: Vietnamese booths launched in French supermarkets
08:15 | 15/01/2023
France’s Carrefour Group and the Vietnamese Embassy in the European country on January 13 launched the Vietnamese booths at all supermarkets run by the French retailer, on the occasion of the Vietnamese traditional New Year (Tet).
At Carrefour supermarket in Lyon city, the Vietnamese booth introduced many agricultural products such as rice, spring roll, noodle, and coffee, along with industrial products.
Traditional fruit tray and Chung (glutinous rice cake) were also prepared to give visitors an insight of Vietnamese Tet.
Attractive promotion programs were run on the occasion, aiming to encourage more visitors to try the products.
Addressing the launching of the booth at Lyon Carrefour supermarket, Vietnamese Ambassador Dinh Toan Thang said that this activity marks a step forwards in the Vietnam-France economic and trade partnership right in the time as the two sides are marking the 50th anniversary of the bilateral diplomatic relations and the 10 years of strategic partnership.
For his part, Carrefour Director Rami Baitiéh said that Vietnamese goods are always among the top 20 best-selling agricultural products in the international zone of Carrefour.
He said he has directed all member supermarkets to ensure the supply of Vietnamese products to meet their customers’ demand.
Bruno Lebon, Executive Director of Hypermarkets at Carrefour, said that the supermarkets are selling 200 products from Vietnam, adding that the firm plans to organise a number of promotion programmes to better meet the rising demands for Vietnamese products.
Lebon said that Vietnamese rice, coffee and tea are popular among French consumers, and Vietnamese fruits are receiving increasing attention from local shoppers. Therefore, the firm is seeking suppliers of these products.
Last year, Carrefour and the Vietnamese Embassy in France organised three promotion programmes of Vietnamese products.
Henig: Trading in tight range ahead of Tết holidays
Experts believe that in the period before the Lunar New Year, the index will fluctuate at a narrow level, but investors can still look for opportunities in short-term positions.
HÀ NỘI — The stock market traded in a narrow range last week, with most industries experiencing a divergence trend. Experts believe that in the period before the Lunar New Year, the index will fluctuate in a narrow level, but investors can still look for opportunities in short-term positions.
The market’s benchmark VN-Index on the Hồ Chí Minh Stock Exchange (HoSE) ended the week at 1.060.17 points, while the HNX-Index on the Hà Nội Stock Exchange (HNX) closed at 211.26 points.
Both benchmarks gained for the week, with the VN-Index rising 0.8 per cent and the HNX-Index up 0.3 per cent.
Liquidity also did not have a big change, partly reflecting the cautious sentiment of investors in the trading sessions before Tết. Specifically, the average matching volume on HoSE reached nearly 436 million shares per session, down 20.65 per cent over the previous trading week, while the HNX’s average matching volume was nearly 51 million shares a session, down 16.52 per cent.
This was also the reason why the VN-Index had no motivation to hit higher levels.
As the Lunar New Year approaches, investors are often worried. However, it is worth noting that in the last 21 years, the VN-Index has increased 15 times and decreased six times during sessions ahead of the festival. Especially, five days before Tết, the average performance is always positive.
Nguyễn Anh Khoa, Head of Analysis and Investment Consulting Department of Agriseco Securities Company, said that this will be an opportunity for investors to accumulate leading stocks, especially in the VN30 basket, at low prices.
Following a slight increase in the benchmark index and continued low liquidity levels in recent weeks, Vietcombank Securities Company (VCBS) believes that the market will continue to struggle and fluctuate in a narrow range before the holidays.
Experts from VCBS recommend short-term investors take advantage of the uptrend to take profits on short-term speculative stocks while limiting the opening of new transactions until the holiday.
BIDV Securities Company (BSC) forecasts that the VN-Index will continue its sideways trend this week, trading in the range of 1,050 to 1,065 points, and may fluctuate more strongly in the sessions close to Tết.
Similarly, Yuanta Securities said that the market may extend the sideways trend and trade in a tight range.
If it breaks away from the sideways trend, the short-term cash flow is still quite weak. Furthermore, the short-term sentiment index is still in the negative territory, indicating that investors are still not ready to invest again and that the market is still diverging.
However, the short-term trend of the general market is still up. As a result, Yuanta advises short-term investors to continue to take advantage of correction sessions to increase the proportion of stocks in their portfolio, but not to exceed 50 per cent.
MB Securities (MBS) said that as the VN-Index gained for two consecutive weeks, the upper limit of 1,064 points is still a strong resistance when there is no support from liquidity.
With a fairly positive breadth, the market is expected to break out of the accumulation zone after the Lunar New Year or remain sideways, but investors will have opportunities with individual stocks.
Henig: Insurance companies benefit from interest rate hike in 2023
Insurance companies will have the chance to earn higher profits in 2023 thanks to a continual interest rate hike trend.
HÀ NỘI — Insurance companies will have the chance to earn higher profits in 2023 thanks to a continual interest rate hike trend.
It is feasible for insurers to continually increase profits this year as the majority of their investment portfolios are bank savings and government bonds, whose interest rates are forecast to remain at high levels in the year.
According to the current legal regulations, insurers have to use at least 70 per cent of their capital to deposit at banks or buy government bonds to ensure the insurers’ capital safety. Therefore, the current high interest rates of the two channels are an advantage for insurers to increase their profits.
As the interest rate hike trend is forecast to remain in 2023, financial activities of insurance companies are expected to continually record positive results this year.
The US Federal Reserve (Fed) last year raised interest rates by a total of 4.25-4.5 per cent per year to curb inflation, the highest rate since January 2008. Fed is expected to continue increasing interest rates in the first quarter of 2023.
The Fed’s interest rate hike caused the money flows to change. Investors have gradually withdrawn in most of the emerging and frontier countries and returned to the US. This pushed the US dollar Index to 104.2 points on December 27 last year, up by 8.6 per cent compared to the beginning of 2022.
Facing the pressure of local currency devaluation, as well as the withdrawal of investment flows, most countries have had to raise interest rates. Việt Nam is no exception, especially when the market is thirsty for capital with the credit growth increasing faster than the capital mobilisation growth. To cope with the difficulties, the State Bank of Vietnam (SBV) increased policy interest rates twice in September and October 2022, by 1 per cent per year each time.
Under the SBV’s move, the interest rates for 12-month term deposits at banks in 2022 increased by 2-4 per cent per year on average. For example, the 12-month interest rate at BIDV is currently 7.4 per cent per year from 5.5 per cent at the beginning of 2022. Similarly, the rate rose from 5 per cent to 9.1 per cent per year at VPBank, from 5.8 per cent to 8.9 per cent per year at Sacombank, from 5.5 per cent to 7.4 per cent per year at Vietcombank.
The savings interest rates are forecast to remain high or even increase higher in the next six months to 12 months.
As interest rates are high, borrowing costs are expensive, and economic growth is slowing. It is currently a tough time for most businesses. However, this is an opportunity for businesses, including insurance companies, which own a large amount of cash.
Statistics of seven listed insurance companies, including Bảo Việt Holdings (BVH), Bảo Minh Insurance Corporation (BMI), PetroVietnam Insurance Corporation (PVI), Vietnam Reinsurance Corporation (VNR), Post and Telecommunications Insurance Corporation (PTI), Petrolimex Insurance Company (PGI) and Military Insurance Corporation (MIG), showed by the end of the third quarter of 2022, the companies had more than VNĐ127.5 trillion in cash. The cash was short-term financial investments with mainly short-term bank savings, which accounted for some 42 per cent of the companies’ total assets.
As the short-term savings interest rates of banks have been consecutively adjusted up, especially at the end of September and October last year, the VNĐ127.5 trillion short-term financial investments of the insurers have earned significant profits.
According to experts, the financial revenue of insurers often depends on the interest rates of the market. When interest rates increased, the financial revenue of the insurers increases and vice versa.
Data from Viet Dragon Securities Company (VDSC) also showed interest rates tended to go up in the 2009-11 period. They then slowed in the 2011-15 period, and increased again since 2016.
The financial revenue of insurers was also under the same move in the periods. The financial revenue of three typical insurance companies, including BVH, BMI and PVI, also increased from 2009 to 2011, when the interest rates rose in the domestic market. In the period of interest rate decline in 2012-15, the financial revenue of the insurers slowed before increasing again in the 2017-19 period.
In fact, besides the insurance business segment, the financial revenue of insurance companies is often high compared to their total pre-tax profit. Specifically, at BVH, in the 2008-21 period, the insurer’s ratio of financial revenue to pre-tax profit averaged 339.7 per cent. The ratio at BMI and PVI was 102.5 per cent and 150.7 per cent, respectively.
According to Ngô Việt Trung, Director of the Ministry of Finance’s Insurance Supervision Administration, despite difficulties and challenges of the economy after the COVID-19 pandemic, insurance companies adapted proactively and flexibly, helping the country’s insurance market maintain a good growth rate in 2022.
As of December 12, 2022, insurance premiums in Việt Nam increased 15.1 per cent year-on-year to more than VNĐ251.3 trillion, of which VNĐ68.2 trillion was from non-life insurers and VNĐ183.10 trillion from life insurers.
By December 12, the total assets of insurance companies grew by 14.51 per cent against the beginning of the year to VNĐ811.31 trillion, while equity reached VNĐ162.81 trillion, up 3.83 per cent.
The numbers are positive in the current context, Trung noted, adding insurance companies have actively improved their competitiveness and expanded their operation area.
— VNS LINK