Last week, Vietnam’s fourth largest bank VPBank listed its shares on the Ho Chi Minh City Stock Exchange under the ticker VPB. In an IPO listing on August 17, the bank listed 1.3 billion shares at a price of VND 39,000 per share. The value of VPBank’s shares surged to $2.3 billion following the IPO, making it the largest private bank by market capitalisation currently trading on the Ho Chi Minh Stock Exchange (VNINDX Index). However, the company’s market value then declined to $2.1 billion as the stock steadied 9% lower in the following three days since its listing.
VPBank was already the fourth largest listed bank after state-owned banks, Vietcombank (VCB), Vietinbank (CTG) and BIDV (BID) that have market caps of $5.9 billion, $3.0 billion and $2.9 billion (as on August 22). The bank also raised $280 million through a pre-listing placement in July.
VPBank is slated to pay dividends of 15% to its shareholders in 2018. Currently, foreign institutional investors constitute 22.34% of its shareholdings, while VPBank chairman Ngo Chi Dung and family own approximately 14% of the bank’s shares. The International Finance Corporation may become another major shareholder in VPBank if the World Bank converts its convertible loan to an equity stake of 5%. VPBank announced a $57 million convertible loan from the World Bank in July 2017. Foreign investors are permitted to hold up to a maximum of 30% in Vietnamese banks.
Nguyen The Minh, deputy research director at Saigon Securities is bullish on VPBank given its dominant position in Vietnam’s retail banking space. “This is a fair price as VPBank is one of Vietnam’s top lenders in the retail banking sector, which has room to increase given Vietnam’s average income growth of 6-10% annually.”
Minh, however, warns of potential risks involved with investing in VPBank. “The downside is that VPBank focuses too much on retail banking; so if the risk management system of VPBank is not good enough, it will face high risks of dealing with non-performing loans,” Minh said.
Meanwhile, VietCapital Securities has assigned a target price of VND 55,000 for shares of VPBank and believes the company’s market value will cross the $4 billion threshold over the next two years. According to a VietCapital securities report, VPBank is among the fastest growing retail banks amongst Southeast Asian countries and frontier markets more broadly with a 30% growth in loans to SMEs in 2016. The bank commands a 48% market share in the consumer finance space and is currently strategically focused on consumer credit and small and medium-sized enterprises (SMEs).
VPBank aims to generate $374 million in net profits by 2018, 50% higher than its 2017-target and nearly double compared to the $171 million (VND 3.9 trillion) net profits reported in 2016. During the first two quarters of 2017, the bank achieved 40% of its 2017-target of $299 million (VND 6.8 trillion) and generated $141 million in pre-tax profits. Further, the bank’s return on assets was 1.9% in 2016, compared to an average of 0.8% among its peers.
VPBank’s key targets for 2017 include: total assets of $12.3 billion (VND 280 trillion), customer deposits of $9.5 billion (VND 217 trillion), customer lending of $8 billion (VND 182 trillion), and NPLs lower than 3%. As of July 2017, the bank has assets of $11.17 billion (VND 254 trillion).
VPBank, earlier known as Vietnam Joint-Stock Commercial Bank for Private Enterprises was established in 1993.