Profit-making Operations but Price-losing Stocks

 

The Vietnam Technological and Commercial Bank (Techcombank) recently announced business results in the first four months 2007. According to the report, Techcombank’s total assets reached VND23,122 billion (US$1.44 billion), 32 per cent higher than at the beginning of 2007. April pre-tax profit was over VND80 billion (US$5 million), up 30 per cent, for a total of VND188.7 billion (US$11.8 million) in the four months. Return on equity (ROE) was 12.1 per cent.

As of late March 2007, the total assets of Vietnam International Bank (VIB Bank) neared VND18,000 billion (US$1.12 billion), up 104.453 per cent from the same period 2006. Pre-tax profit reached nearly VND64 billion, up nearly 70 per cent on year.

Saigonbank also made VND65 billion profit in the January-April period. This bank has permission from the State Bank of Vietnam to raise chartered capital to VND1,020 billion within 2007.

The high performance of the first quarter has strengthened confidence for a profitable year in 2007.

Most impressively, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) recorded pre-tax profit of VND413 billion in the first quarter 2007, representing an on-year increase of 183 per cent. Sacombank assets reached roughly VND34,000 billion (US$2.12 billion), up nearly 37 per cent from earlier this year.

 

In fact, small bank share prices were previously too high, exceeding their intrinsic value, according to expert analyses. The price of bank shares, particularly small or newly established banks, sharply increased in the wake of the OTC market boom.

Many bank share prices dropped sharply from late 2006 and early 2007. For example, the price of Southern Bank shares fell from VND82,000 each to VND60,000. Eximbank shares lost nearly VND4 million, while OCB (Orient Commercial Bank) share price dropped from VND12.5 million to VND8 million.

 

However, according to many economic experts, bank shares will remain attractive to investors. Mr. Nguyen Van Thuan, Dean of Accounting - Finance - Banking Faculty of Ho Chi Minh City Open University, said bank issues would be strongly attractive to investors in the coming time. Especially foreign investors always consider finance and banking the most potential fields in Vietnam.

Dragon Capital said bank stocks market prices have never exceeded the benchmark of 20 times the nominal value, while stock prices in other industries surpassed face value by 30, or even 50 times. Thus, many expect a strong jump of bank issues in the coming time.

However, unlike overheated growth in the past, only stocks of well performing banks will go up, while small and under-performing ones will stand at more reasonable rates, possibly like the rates in late 2006.