Bank stocks have recently had tremendous gains, with several large-cap equities rising by tens of percent or more.

Bright Prospects

The increase in bank stock prices is viewed as a positive indicator for the financial industry, particularly when big banks continue to expand and enhance operational efficiency.

Specifically, the banking sector's remarkable business results in Q4 2023 have significantly contributed to the total market profit, with a net profit rise of 22.5% compared to the same time last year and a consistent 3.8% growth rate throughout 2023.

Experts and investors are paying close attention to this trend, seeing it as an essential sign of future stability and possible growth for the banking industry and the economy as a whole.

ABS Securities Company feels that the banking sector's forecast for 2024 is fairly bright, citing a number of favorable reasons. Among these, interest rate cuts are still considered to offer a significant boost to borrowing capacities and the revival of the real estate industry. The new Real Estate Business Law and Credit Institution Law will help improve circumstances in the sector.

Notably, the predicted increase in the Net Interest Margin (NIM) is due to the slower decline of lending rates relative to deposit rates, which improves cash flow for companies and reduces bad debt pressure on banks, particularly in the real estate sector.

Mr. Nguyen Minh Hoang, Director of Analysis at Nhat Viet Securities Company, stated: "After analyzing the cash flow on the stock market, I highly appreciate the market's recovery in the first two sessions of this week, and the cash flow is rapidly expanding to other industrial groups."

"We all see that the leading group during the recent period is the banking sector, which has been tightly accumulated, and even some stocks still have strong price increase potential, like BID, TCB,... This shows that the cash flow spreading to other industry groups is not merely profit-taking from the leading groups, but new cash flow from outside entering. In the last session of last week, compared to September 2023, this downturn has much better bottom-fishing demand, sending a signal that the market is very good," Mr. Nguyen Minh Hoang commented.

Which stocks to consider?

According to Mr. Nguyen Minh Hoang, the market rallied in the first two sessions of this week to erase the February 23rd fall, propelling numerous companies, including securities, fertilizer, and some other industrial groups, to new highs. As a result, we may encounter opposition at this time, but there are two possibilities:

First, the VN-Index may rise to 1,250-1,300 points before beginning to correct.

Second, if purchasing demand begins to decrease, the market may vary within this range, going sideways and continuing to absorb supply near the 1,250-point level before rising.

In the context of the "leading wave" such as banks, mostly large-cap companies with tight foundation accumulation, and the new money that has entered the market, there is still a significant amount of money standing outside. As a result, the likelihood of a large market downturn is low.

Mr. Nguyen Minh Hoang believes that the driving force of expectations for the banking sector comes from credit activities and depends a lot on the macro context. If the macro context continues to recover, manufacturing businesses recover, start to expand investment, and new borrowing needs emerge, then all these will promote the return of credit growth, thereby improving the business operations of banks. "We have also seen somewhere that the bad debt of the banking sector in Q4 2023 started to peak and show signs of leveling off or decreasing. If all factors are simultaneously positive, then the business quality, as well as the financial indicators of the banking group, will improve," Mr. Hoang emphasized.

Many investors are interested in bank stocks, including TCB. According to Mr. Nguyen Minh Hoang, TCB's present valuation is at an undervalued level for investors to consider. If this stock is in a supply absorption period, it might be the next purchasing opportunity that investors should consider. Or, while CTG's P/B ratio of roughly 1.3 is greater than TCB's, when compared to the identical characteristics of state-owned banking groups such as BID or VCB, CTG remains comparably inexpensive.

Furthermore, Vietinbank is one of the banks that delivered strong business performance in Q4 2023. Investors might thus consider CTG shares.