Vietnam bank shares stay cheap despite profit growth

BVBank is a case in point: pre-tax profit rose 90% year on year in the first nine months to more than 825 billion dong, already above its full-year target, but its BVB shares still closed at 10,200 dong. PVcomBank reported nearly 1.88 trillion dong of pre-tax profit in the period, up 35.2%, while VietABank posted 1.19 trillion dong and controlled bad debt at 1.38%, yet its stock finished at 9,000 dong. SHB said nine-month pre-tax profit rose 17% to about 14.3 trillion dong, but the stock still traded at 10,400 dong.

The main reason is mechanical as much as fundamental. Vietnamese banks have spent years paying dividends in stock and issuing bonus shares to retain capital for lending growth, a policy that expands the share count and pushes down the nominal price after each ex-rights adjustment. Techcombank’s shares, for example, fell from 33,500 dong before a 50% stock dividend to about 21,500 dong after the adjustment. Across 27 listed banks, the number of shares outstanding has almost tripled to 108.9 billion from 40.7 billion at end-2020.

That dilution matters because it can leave earnings per share lagging even when absolute profit rises. For investors, the question is not only how much a bank earns, but how much of that profit accrues to each share. A lender can report billions in pre-tax income and still fail to generate enough per-share value to support a higher stock price if capital is repeatedly recycled into new equity.

The broader market backdrop has not helped. Bank shares in Vietnam have also been hit by a wider stock-market correction, with 20 of 28 names lower this year and some down 20% to 30%. In that environment, investors have been less willing to reward strong operating results, especially when they do not translate into stronger returns on equity or better capital efficiency.

Valuation is therefore more useful than the sticker price. OCB’s roughly 10,150 dong share price looks cheaper than Techcombank’s 21,500 dong, but OCB’s price-to-book ratio is around 0.85 times versus 1.26 times for TCB, a reminder that nominal share price alone says little about value. Chứng khoán Thiên Việt estimates the sector’s average P/B at about 1.4 times, below its five-year median of 1.6 times, which leaves room for selective rerating if lenders can sustain ROE, keep asset quality stable and manage funding costs.

The bull case is that this is a classic re-entry point: many banks are still growing profit, the sector remains central to credit creation and lower valuations could attract long-only money once macro conditions stabilize. The bear case is that dilution, softer ROE and any rise in credit costs could keep “cheap” banks cheap for much longer.

For investors, the next catalyst is not simply another strong earnings report, but evidence that profit growth is being converted into higher per-share returns. Until then, Vietnam’s banking sector may remain profitable on paper while looking inexpensive for a very good reason.