Introduction

Vietnam’s banking sector has been likened to the durian fruit—divisive among consumers but yielding rewards for those with an acquired taste. This report delves into the sector’s performance, challenges, and opportunities as it heads into 2025, offering a detailed analysis of key players.

Performance Review: FY19-9M24

Despite macroeconomic headwinds such as Covid-19 and market turmoil, Vietnam’s banks demonstrated remarkable resilience from FY19 to 9M24. They maintained a compound annual growth rate of 21% and an average return on equity (ROE) of 18.3%. However, by the third quarter of 2024, the loan-loss coverage ratio of listed banks had decreased significantly, highlighting the sector’s dependency on economic recovery.

Outlook for FY25: Uneven Recovery

With an expected GDP growth of 6.7-7% in 2025, driven by public investments and a property sector boost, the banking sector is poised for credit growth of around 15%. However, the expansion of Net Interest Margins (NIM) will likely be limited to banks with robust customer bases and cost competitiveness. Aggregate profit is forecasted to grow approximately 19% year-on-year, sustaining an average ROE above 17%.

Investment Recommendations

The report emphasizes the importance of selecting banks that combine reasonable valuations with a clear path to earnings recovery. Here are the detailed analyses for each highlighted bank:

Vietcombank (VCB)

Vietcombank remains a top pick for its strong fundamentals. With a market capitalization of USD 20,692 million, it is recommended as a “Buy” with a target price of 135,000 VND, representing a 44% upside. The bank is expected to maintain its leading position with a P/E ratio of 15.4x in FY24E and 13.4x in FY25E.

Techcombank (TCB)

Techcombank is another preferred choice, recommended as a “Buy” with a target price of 32,450 VND, reflecting a 34% upside. It holds a market cap of USD 6,705 million, with a P/E ratio expected to decrease from 7.8x in FY24E to 5.7x in FY25E, indicating robust earnings potential.

VPBank (VPB)

VPBank, with a market cap of USD 6,093 million, is rated as “Hold” with a target price of 23,300 VND, offering a 19% upside. It is noted for its high dividend yield of 5.1% in both FY24E and FY25E, despite a moderate P/E ratio of 12.4x and 9.3x respectively.

MBB Bank (MBB)

MBB Bank is favored for its growth capacity, rated as a “Buy” with a target price of 33,800 VND, providing a 38% upside. With a market cap of USD 5,112 million, it boasts a low P/E ratio of 5.8x in FY24E and 4.8x in FY25E, reflecting cost efficiency and potential for earnings expansion.

Asia Commercial Bank (ACB)

Asia Commercial Bank is recommended as “Hold” with a target price of 28,900 VND, offering a 12% upside. With a market cap of USD 4,521 million, ACB is expected to maintain a stable P/E ratio around 6.4x in FY24E and 6.0x in FY25E, accompanied by a dividend yield of 3.9%.

Sacombank (STB)

Sacombank is recommended as a “Buy” with a target price of 41,100 VND, reflecting a 21% upside. It holds a market cap of USD 2,521 million, with a P/E ratio projected to decline from 6.6x in FY24E to 5.1x in FY25E, indicating potential growth in profitability.

Conclusion

As Vietnam’s banking sector navigates through an uneven recovery, strategic stock selection becomes crucial. Investors are encouraged to focus on banks with strong growth capacities, ambitious leadership, and robust customer bases. Maybank Securities Limited remains optimistic about the sector’s prospects, with specific banks positioned for substantial growth in 2025.