Will VCB stock continue to lead the banking sector?

Investors had been advised to "watch and buy" VCB—shares of the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)—weeks in advance. These recommendations and investor actions were aimed at capitalizing on Vietcombank’s record-breaking dividend payout of 49.5%.

With a strong customer base and loans to significant national projects, Vietcombank is predicted to continue to hold its top spot in terms of profitability, credit growth, and lending capacity, meaning that VCB will continue to be the most popular banking stock in the medium and long term. Along with HDB, VPB, and MBB, VCB also has the chance to increase loans via the State Bank of Vietnam's mandated transfer of weak banks. This relates to Vietcombank's purchase of CBBank, which is currently known as VCB Neo.

However, since VCB's adjusted price jumped more than 3% to an all-time high of 66,700 VND per share, the trading session on the ex-dividend date (March 12) marked a "new peak" in investor expectations. Also, with about 7.6 million shares traded, liquidity hit its best level since November 2017.

According to the plan, Vietcombank will issue over 2.76 billion shares to pay dividends to shareholders, equating to an issuance ratio of 49.5% (shareholders holding 1,000 shares as of the record date will receive 495 new shares). The issuance will be funded from the bank’s remaining post-tax profits after allocations to reserve funds, covering up to the end of 2018 and the remaining profit from 2021. This issuance plan was approved by the National Assembly in its November 2024 session, permitting Vietcombank to increase its charter capital by an additional 20.695 trillion VND from state capital investments. Consequently, the total charter capital will increase by 27.666 trillion VND, raising Vietcombank’s charter capital from 55.891 trillion VND to approximately 83.557 trillion VND—the highest among banks in the system.

With this new share issuance, Vietcombank has set another record for the largest number of circulating shares, reaching nearly 8.36 billion units—the highest number of listed shares for any publicly traded company on the stock exchange.

Beyond this highly anticipated dividend payout, Vietcombank has two additional stock dividend plans pending regulatory approval. At the upcoming 2025 Annual General Meeting (AGM) scheduled for March 25, 2025, another key agenda item for shareholders will be the 2024 profit distribution plan. Earlier, at the Extraordinary General Meeting (EGM) on March 7, Vietcombank elected Le Quang Vinh—its current CEO—to the Board of Directors for the 2023–2028 term.

Looking ahead to 2025 and beyond, Vietcap Securities expects Vietcombank’s credit growth to improve, supported by an improved economic outlook, monetary and fiscal policies that stimulate growth, and a favorable regulatory environment. These factors are anticipated to encourage the bank to adopt a less conservative lending approach.

"Furthermore, Vietcombank is well-positioned to seize growth opportunities as the government accelerates investment to achieve higher economic growth targets. The bank has traditionally played a leading role in financing large-scale, nationally significant investment projects such as Long Thanh International Airport and the Block B - O Mon gas project. Over the years, VCB has established comprehensive strategic partnerships with major state-owned corporations such as EVN, PVN, and ACV—entities expected to be key investors in large-scale national projects during this era of strong economic growth," Vietcap noted.

Additionally, according to Vu The Quan, Deputy Head of Research at Vietcap, the expected recovery of the real estate market will further support mortgage lending, which accounted for 18% of Vietcombank’s loan portfolio as of the end of Q3 2024.

As of the first week of March 2024 (March 4), Vietcap recorded VCB stock trading at a historically low valuation, with a trailing P/B ratio of 2.62x—nearly two standard deviations below the five-year average of 3.25x.

"We believe VCB’s valuation decline over the past year is due to (1) a lower ROE and (2) net foreign selling. However, the current valuation presents an attractive risk-reward ratio as we believe VCB will outperform other banks in the long term and maintain its leading industry position due to several sustainable competitive advantages, including (1) low funding costs driven by strong deposit mobilization, (2) superior asset quality across customer segments, and (3) market leadership in trade finance and international payments. Additionally, in our base case scenario, Vietnam may be upgraded to an emerging market by FTSE in the second half of 2025. VCB will be among the stocks benefiting from new foreign capital inflows when Vietnam’s stock market is reclassified," Vietcap stated.