July slide hits Vietnam's bank stocks while broader Asia-Pacific sees gains

Vietnamese bank stocks fell across the board in July, even as the broader Asia-Pacific region outperformed Europe and the US.

National Citizen CJSB's (NCB) total returns fell 21.4% in July, the worst performance among Asia-Pacific bank stocks with market capitalizations above $100 million. Nine Vietnamese banks ranked among the 15 worst-performing stocks in the region in July. All 24 Vietnamese bank stocks in S&P Global Market Intelligence's analysis ended July in the red.

NCB completed a 10 trillion Vietnamese dong capital raise in June, its largest, according to the company, raising its charter capital to 29.280 trillion dong. The bank has raised capital in four of the last five years and intends to use the proceeds to further increase its lending capacity.

Vietnam Export Import CJSB, Saigon - Hanoi CJSB and Tien Phong CJSB rounded out the four largest declines, as total returns at each lender fell about 15% in July.

Ambitious growth targets set by Vietnam's government and central bank have driven lending expansion ahead of deposit growth, raising concerns over liquidity. Vietnamese banks lowered both loan and deposit interest rates earlier this year, despite increased inflation resulting from the joint US-Israeli strikes on Iran, to demonstrate the "efforts and profit sharing of the banking sector with the business community," according to a press release from the Vietnam Bank's Association.

Australia's AMP Ltd.'s shares rose 34.0% in July, the highest return among Asia-Pacific banking stocks. The financial services company's better-than-expected earnings, including significant growth in its mainland China business, drove investor optimism.

Two Hong Kong-based banks — Bank of East Asia Ltd. and Dah Sing Financial Holdings Ltd. — posted the second- and third-highest returns in the region at 33.1% and 32.2%, respectively.

Japan's Ehime Bank Ltd. saw its shares surge higher in the latter half of July after news of a planned merger with Iyogin Holdings Inc. Ehime Bank's shares returned 30.1% in July, while Iyogin's shares gained 15.4%.

Asia-Pacific banks largely outperformed in July as the S&P Pan Asia BMI Banks index returned 9.6% for the month, outpacing the Europe bank index's 7.0% gain and the US-focused S&P 500 Bank index's 5.0% increase.

For the year, the European bank index rose 22.0% year-to-date through July 31, compared to 19.9% for the Pan Asia bank index and 10.5% for the S&P 500 Bank index.

As of Aug. 5, US$1 was equivalent to 26,254 Vietnamese dong.