Banks drop in value

  • October 29, 2015

Though the most difficult period for commercial banks in Vietnam is over, the banks are still decreasing in value.

Vietnam, SBV, total assets, CAR

The Debt and Asset Trading Company (DATC) has announced the auction of Orient Bank’s and SCB’s shares, with surprisingly low starting prices.

DATC would put 26,660 OCB shares at the starting price of VND4,900 per share, or VND130.6 million for the hold bulk of shares. 

Meanwhile, the starting price for SCB’s shares is VND4,100 per share, or VND101.1 million for the lot of 24,662 shares.

Both banks have seen their value decreasing because of unsatisfactory business performance. 

OCB’s financial report showed that the post-tax profit of the bank in the second quarter was VND40.4 billion only, a sharp decrease from VND98.6 billion in the same period of 2014.

It was partially because OCB increased provisions against credit risks by twofold. It made a provision of VND104.3 billion in the second quarter of 2014, while the figure soared to VND230.8 billion in the second quarter of 2015.

However, even if the amount of money against risks in the second quarter of 2015 was the same, the bank’s expected profit of VND150 billion would still be very modest if compared with the bank’s charter capital of VND3.547 trillion. 

OCB plans to raise its chartered capital to VND4.5 trillion this year. However, analysts commented that it would be difficult for the bank to issue shares at the price equal to the nominal value if DATC sells OCB’s shares so cheaply.

SCB’s business performance was also unsatisfactory. The bank’s post tax profit in 2014, 2013 and 2012 was VND90.2 billion, VND42.6 billion and VND63.8 billion, respectively, compared to the profit of hundreds of billions of dong in the years before.

The business result was discouraging, as SCB was the fourth largest commercial bank in Vietnam. Its charter capital increased from VND12.294 trillion to VND14.294 trillion.

In fact, SCB and OCB were not the only shares sold at below face value. A lot of other banks face the same problem.

On the OTC (over the counter) market, Techcombank’s shares were traded at VND9,200-9,800 per share, though Techcombank is a profitable bank, while Maritime Bank’s shares were VND3,500-4,200 per share.

Banks have become less attractive to investors also because of the sharp decreases in their total assets.

A State Bank’s report showed that the total assets of the banking system by the end of August had reached VND6,750 trillion, an increase of VND87,373 compared with the end of July. 

Vietcombank surprised the public when it announced that its total assets in the first quarter of 2015 decreased by VND37 trillion compared with the end of 2014.



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