The valuation of the VN banking sector is higher than that of its regional peers: MBS

A VietinBank office in Hanoi, Vietnam. Vietnam’s banking sector valuation ratio will become more attractive as banks continuously increase their registered capital. VIETNAM NEWS AGENCY

The valuation of the Vietnamese banking sector is relatively high compared to other countries in the region, according to Military Bank Securities Company (MBS).

News portal cited a recent banking sector report by MBS, showing that the Vietnamese banking sector’s price-to-earnings (P/E) ratio at the end of last month was 13.02, significantly higher than other countries in the region, such as Indonesia (11.9), Singapore (11.8), Thailand (9.3), China (4.7) and South Korea (3 ,9).

The Vietnamese banking sector’s price-to-book ratio (P/B) is also considerably higher than the P/B of the countries listed by MBS, at 2.26 against 0.90 for Indonesia, 1.10 for Singapore, 0.70 for Thailand, 0.40 for China and 0.40 for South Korea.

With positive news about the increase in statutory capital of Vietnamese banks, MBS believes that the valuation ratio of the Vietnamese banking sector will become more attractive.

According to MBS, in addition to promoting products and services, the capital increase will also help banks to strengthen their soundness and competitiveness in addition to better risk management.

By the end of last year, Vietnam’s banking system had been supplemented with more than 33 trillion VND ($1.44 billion) in registered capital, helping the country have 18 banks registering more than 1.44 billion registered capital. 10 trillion VND each.

Many banks continued their major capital increase projects this year. VietinBank is currently the leader in terms of registered capital with 48.050 billion VND, followed by BIDV, Vietcombank, Techcombank and Agribank.

According to MBS, with the requirement of the State Bank of Vietnam (SBV) on the capital adequacy ratio (CAR), domestic commercial banks will have to continuously take measures to increase their registered capital next year.

Under SBV regulations, by January 1, 2023, banks’ CARs must meet the Basel II standards prescribed in Circular 41/2016/TT-NHNN. So far, 16 out of 35 banks have met the CAR requirements according to Circular 41.

In addition to meeting the SBV’s CAR requirement, the capital increase will also help strengthen banks’ financial capacity and increase banks’ medium and long-term capital to expand business operations when the ratio of short-term funds term used for medium and long term loans is also tightened by the SBV.

Therefore, MBS predicts that the race to raise banks’ capital will continue strongly in 2022 to help banks further develop their business activities, strengthen governance and financial capacity, improve asset quality and increase profitability in association with risk management.

On lending, as demand for credit increases after the economy reopens in the last quarter of 2021, MBS expects the banking sector to achieve credit growth of around 13% in 2021, which is equivalent to the growth rates of previous years.


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