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Customers do transactions at Techcombank (Source:

The New York-based financial institution said in its research that the Vietnamese banks “offered an increasingly rare combination of high and self-sustaining earnings growth."

“This, with a favourable credit cycle, should lead to significant multi-year returns,” the US bank reported early this month.

In addition, high visibility on nominal gross domestic product (GDP) and current account surplus allows “extrapolation of strong earnings and credit growth in Vietnam.”

JP Morgan rated shares of the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), the Vietnam Technological and Commercial Joint Stock bank (Techcombank) and the Asia Commercial Joint Stock Bank (ACB) at over weight and the Vietnam Prosperity Joint Stock Commercial Bank (VPBank) at neutral.

The banks under JP Morgan’s coverage are expected to deliver 15-21 percent return-on-equity (RoE) ratios in the next two years as “they have started making money on both sides of the balance sheet.”

JP Morgan also highlighted favourable cyclical positioning as a defining feature of the Vietnamese banking system, which managed asset quality problems well in 2012-13.


It spoke highly of the creation of the Vietnam Asset Management Company (VAMC), which “provided a five-year timeline to write off bad debt” and allowed banks to grow sustainably through being funded against VAMC bonds.

Vietcombank, Techcombank, ACB and VPBank were forecast to record a 12 percent earnings compound annual growth rate (CAGR) for 2019-21 on the back of a 16 percent loan CAGR and a 6-13 basis point net interest margin (NIM) compression, as competition in retail loans should crimp yields.

JP Morgan warned the four banks’ stock of capital would appear low at a 12.2 percent capital adequacy ratio (CAR) as they were “transitioning from Basel 1 to Basel 2.”

Meanwhile, high RoE, limited dividend payout rates of 0-17 percent and reasonable risk-weighted asset growth of 13-19 percent would ensure capital needs are met.

In addition, credit penetration at 104 percent of the revised GDP is high, according to JP Morgan, due to “leverage build-up at State-linked companies with low capital efficiency” and a higher consumer leverage that would limit growth and lead to non-performing loans (NPLs)./. VNA

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