Why TCB Returns To Lead Bank Stocks?

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In the session on July 4th, TCB shares of Vietnam Technological and Commercial Joint Stock Bank (Techcombank) continued to lead the banking group with impressive transactions with more than four million shares matched the highest level in the last three months.

In the last three sessions, the return of foreign investors has made TCB trading volume increase significantly. Specifically, more than four million TCB shares were traded with a total value of 204.9 billion dong, while more than 2.7 million shares were matched on July 2nd with a value of 63.3 billion dong, and more than 1.9 million shares were matched on July 3rd with a value of 41 billion dong, etc.

Nguyen Hung an investor of Asia Commercial Bank Securities Company (ACBS) trading floor said that the positive recovery of TCB has led to the increase of many bank stocks, such as ACB, BID, CTG, MBB, EIB, VIC, HDB, VPB, TCB, and VCB. The rise of bank stocks is an important factor supporting the market in general and the VN Index in particular. Accordingly, closing the session on July 4th, the VN Index increased by 1.32 percent to 973.04 points.

The uptrend of the market not only focused on Bluechips but spread to many other sectors such as securities (SSI, VND, HCM, AGR, SHS, VCI, etc.) real estate and construction (CEO, CTD, DIG, DXG, FCN, SJS, NVL, VPI, etc.) or industrial zones (NTC, BCM, D2D, SZL, SZC, etc.).

TCB is the only stock of bank stocks that has a unique ecosystem with close connection with Vingroup’s ecosystem, which helps reduce credit risks and enhances cross-selling products. At the same time, it allows TCB to build the high and most diverse non-interest income among banks in Vietnam.

From July 1st 2019, TCB officially received the approval of the State Bank of Vietnam (SBV) to apply Circular 41/2016/TT-NHNN regulating the safety ratios for banks according to the Basel II standards. This is a good news for TCB when it has continuously recorded revenue growth for 14 consecutive quarters, with Capital Adequacy Ratio (CAR) always being high at about 14 percent.

Nguyen Le Quoc Anh general director of TCB shared that “The SBV’s recognition is the good news that followed the successes of TCB in the last 14 quarters. With the approval of the SBV, TCB will be entitled to self-manage the outstanding debts over the CAR, and this will help the bank keep its credit growth rate at no less than previous years.”

Meanwhile, TCB’s profitability ratios such as Return on Asset (ROA) and Return on Equity (ROE) are also high in the region. This is a huge competitive advantage of the bank.

In addition the outstanding business results, closing the first quarter (Q1) of 2019, the bad debt ratio of TCB stood at 1.8 percent, reflecting the bank’s strong focus on risk management, which helped it cut 80 percent of the risk provisioning expenses compared to Q1 2018.

After the profit growth cycle of Vietnamese banks reached the peak in 2017 2018, the banking sector has entered a stable development period. However, some banks with better positions have expanded retail lending and non-interest segments, while their valuation is more attractive than regional banks.

With the forecast of VN Index may return to 1,000 points in the near future, the stocks of the banking sector as well as other sectors may continue to rise in the near future. Therefore, VNDIRECT recommends the purchase of TCB, ACB, VPB, BID, and CTG. In which, VNDIRECT suggests that the target price of TCB will be 27,400 dong per share.


Category: Finance, Vietnam

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