The recent analysis of Viet Capital Securities (VCSC) assessed Vietnam Export Import Commercial Joint Stock Bank (Eximbank-EIB) as a “mysterious” case among listed banks with many issues remained unsolved.
EIB was a rare case in the Vietnamese banking industry with shareholder fluctuations over the past nine years.
VCSC assessed that what made EIB attractive to Asia Commercial Joint Stock Bank (ACB) before 2012 was no longer available. The banking system moved away from the gold business and continued to grow while EIB had been backward for many years. Currently, the situation of no clear controlling shareholder continued to be an attraction for domestic investors wishing to own the bank’s foundation between Tien Phong Commercial Joint Stock Bank (TPBank) and Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) on the network.
Trading of EIB shares was characterised by low volume through matching orders but the number of agreed transactions in the first six months of 2019 amounted to 47.7 percent of outstanding shares. Besides, because of conflicting shareholders, the 2019 general Meeting of Shareholders was unsuccessful despite many efforts. Therefore, VCSC believed that EIB was not a safe stock for institutional investors until liquidity and shareholder issues were settled.
Meanwhile, interest income was affected by low NIM (Net Interest Margin) and fee income was difficult due to the competitive environment for international payment services and no other factors stimulating growth.
EIB had low credit growth with a compound annual growth rate of 7.1 percent for the 2015 to 2018 period. NIM in 2017 and 2018 were below 2.5%, at least one percentage point lower than usual private banks due to relatively high deposit costs.
While Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) STB had room to increase the loan or deposit ratio from the current 70 percent to improve NIM, the loan or deposit ratio as prescribed by the EIB was 76 percent in the first six months of 2019 compared with the ceiling of 80%.
However, there was room for improvement in a yield of profitable assets by optimising the investment securities portfolio. Regarding fee income, payment services accounted for 82 percent of net fee income in 2018 and 84 percent for the first six months of 2019. However, EIB’s international payment volume achieved a compound annual growth of 3.6 percent from 2013 to 2018, while Vietnam’s total import and export turnover achieved a compound annual growth of 12.7 percent during the period. This segment showed increased competition and decreased market share.
Although the bank signed a five-year exclusive bancassurance contract with generali in 2016, the market share was still small, only 1.3 percent in the first six months of 2019. Also, the growth momentum was not outstanding compared to other banks.
EIB’s branch network had not changed in the last three years which showed that the expansion was still slow. The composition of the Board of directors reflected the conflict between shareholders and the Chair position in the past nine months had not reached a consensus, VCSC said.
High-level personnel had been a prominent issue of Eximbank since the beginning of the year until now when there had been news about changing the Chair of the Board of directors. The escalating conflict among groups of shareholders significantly affected the bank’s development plan. Until now, since the annual shareholder meeting had not been successfully organised, the bank’s policy remained unapproved. According to the management’s plan, the profit before tax target in 2019 was 1.077 trillion dong, 30 percent higher compared to 2018.
