VIB turns a new page

With this resolution, it is almost certain that VIB will see a shift in its shareholder structure.

Preparation for Foreign Shareholder Disinvestment

It is known that VIB currently has Commonwealth Bank of Australia (CBA) as a foreign strategic stakeholder, with roughly 503.22 million shares, or 19.84%. The partnership began in 2009 and was formalized in 2010. During its time with CBA, VIB has evolved in terms of total assets, capital size, and stock market listing, becoming a bank with a strong focus on retail and remarkable development in the banking card industry, resulting in increased profitability compared to other banks.

By the end of 2023, VIB had the greatest ROE of the 12 listed banks with the biggest asset sizes, with a personal lending share of around 90%. According to BVSC's statistics, VIB maintained an average ROE of 23% over six years and leveraged its earnings to continually build capital, bringing its total assets to more than 342 trillion VND (top 11 listed firms). VIB's post-tax earnings continued to increase rapidly, with a CAGR of 50% over five years, the highest in the group.

According to the resolution, VIB shareholders have expressed concerns about how the reduction in the foreign ownership ratio will effect CBA's divestment and if VIB will seek another foreign partner. These questions have been successfully addressed.

It is clear that, with the set deadline of July 1 for reducing the foreign room, CBA's divestment strategy has been carefully designed to comply with rules and regulations. Although VIB did not specify whether it would seek another foreign partner in the future, a shareholder holding more than 5% (individual) and a true strategic partner (organizations from 10% for domestic investors and as per the government-regulated ratio for foreign investors) may not appear immediately (according to the 2024 Credit Institution Law).

What impacts VIB?

The market is very interested in CBA's divestment from VIB. Initially, this interest is also due to the foreign investment wave in banks during 2009-2010, where CBA was one of the most loyal and effective partners, clearly contributing to the joint ventures. Over the years, numerous cases of foreign investors withdrawing capital have occurred, such as at ACB, EIB, STB..., and a new wave of capital contributions has also appeared at BID, VCB, CTG, VPB, OCB... The departure of CBA at this time brings expectations of a new opportunity for VIB in increasing capital and scale to enter a new phase or turning point with the bank?

Vietcap Securities believes that, following CBA's divestment, VIB will also be proactive in selecting potential strategic partners and leveraging the foreign investor ownership ratio if the bank plans to raise capital in the future.

It should be noted that in the market, banks currently seeking foreign partners like TCB, HDB, and now VIB - private banks with high ROE and CAGR in recent years, will be deemed much more attractive to strategic investors. This is even more notable in the context of the EVFTA commitment from August 2020 to date, where no Vietnamese bank has been approved for European credit institutions to hold a 49% ownership stake.

In this case, it will not "apply" to state-owned commercial banks. Meanwhile, MBB, a bank involved in restructuring weak credit institutions, might be prioritized but still has a semi-state ownership structure; VPBank, with a similar drive, has already committed to a Japanese partner..., so the opportunity for the private banking sector with significant movements is even greater.

VIB's management has stated that the bank will seek a new strategic partner after CBA's divestment, according to information from SSI. Therefore, whether VIB can turn a new page or not will depend on its strategic orientation and specific actions.

VIB's credit growth for 2024 is expected to reach 18.9%, lower than its target approved by the SBV of 20%, as Vietnam's economic activity is expected to pick up in 2024. With the expectation of slightly higher lending rates while deposit rates increase more slowly, VIB's projected NIM for 2024 is 4.85% (from 4.75% in 2023). The pressure of bad debt at VIB may slightly decrease thanks to the general economic recovery and business. Accordingly, PHS estimates VIB's post-tax profit in 2024 to be 9,843 billion VND, an increase of 15% compared to the same period. Based on Residual Income and P/B valuation, PHS recommends buying VIB shares at a price of 27,000 VND/share. As per the market price on June 14 (22.5), the potential price increase for VIB is estimated at 19.5%.