SUMMARY

2024- SOLID AND RELIABLE

The multi-dimensional context in the economic picture is partly reflected in the bank’s business picture in the first half of the year.

Domestic consumption and manufacturing increased, and credit was expanded into these sectors.

However, the housing loan market, which makes up a sizable share and was the banks’ primary area of activity in prior years, has not yet demonstrated a discernible comeback. In general, this segment is still rather depressing in the first half of the year, even though the financial results for the second quarter have not yet been released. However, we believe that by year’s end, the domestic real estate market will progressively warm up, giving banks a foundation on which to meet their 2024 credit growth goal.

We keep hearing the term “Differentiation” in relation to each bank’s performance. Differentiation is evident in the bank performance ratios, deposits, earnings, and credit growth. However, variations in the same direction of the bad debt trend (UP) still present difficulties for banks’ earnings outcomes.

But we have faith that banks will effectively navigate obstacles and emerge victorious with the right business strategy.

Additionally, the banking sector will continue to be crucial to the State Bank’s (SBV) policy and market regulation efforts in 2024. Specifically, the state-owned banking sector (SOB) will normally assist the SBV in controlling the gold market.

BANKS’ BUSINESS PROSPECTS

Profits in the banking sector are projected to increase by 11% in 2024, which will see a 5% increase in state-owned bank (SOB) profits and a 15% increase in private commercial bank profits. The higher net interest income as a result of widened credit scale and net interest income margin (NIM) served as the primary catalyst.

The burden of rising bad debt pressure is felt by banks’ provision expenses. We predict that system-wide provision costs will be equal to 2023 and that system bad debt is getting close to its peak. Based on the aforementioned projection, there will be greater opportunities for industry profits in 2025, along with the potential for a more robust economic rebound, encouraging investment and lending activity.

INVESTMENT RECOMMENDATION

With an average increase of 16% ytd, price changes in banking industry equities were generally rather positive in the first half of the year.

That being said, this represents the market’s average growth. There is still a lot of space for growth in the banking sector, even with a P/B valuation that is 15% lower than the 5-year average. Nonetheless, picking equities with strong asset quality and solid fundamentals is essential.

RECOMMENDED STOCKS: TCB, HDB, LPB, VCB, ACB.