Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

Vietnam Technological & Commer / Equity Bottom-Up

*Silly Season at Techombank:Vietnam Technological and Commercial JSB (TCB.VN) [Techombank] was able to post a 1Q20 result of VND 2.5 bn  - improving VND 830.9 mn (51.1%) linked quarter. While we have always believed Techombank to be the best house in a bad neighborhood, these numbers make little sense in light of the COVID-19 pandemic which has eviscerated the performance of every other bank that we follow. Reviewing the Techombank result announcement, the numbers suggest that while loss provisions increased 151% linked quarter Techombank posted incredibly positive operating jaws – with revenues increasing 25.5% and costs contracting 0.4%;*Credit Substantially Weaker:In reviewing the problem loan book, Techombank’s figures simply don’t add. We find that  - despite its challenges in properly classifying problem assets – net new NPLs actually increased VND 2.8 bn or almost 92% on an annualized basis – which is quite high; and*Provisions Set To Increase From Here: While we give Techombank credit for increasing its loss provisioning efforts by VND 464.2 mn (151%) linked quarter, the level of provisioning seems far from inadequate for the known and potential risk in this loan portfolio. It is disappointing to see that a name such as Techombank is pulling on credit levers and playing the earnings growth game. By our calculation, loss provisions should have been closer to VND 3.5 bn in 1Q20 alone which would bring earnings into a more realistic area of VND 500 mn or 20% of stated results.

*Silly Season at Techombank:Vietnam Technological and Commercial JSB (TCB.VN) [Techombank] was able to post a 1Q20 result of VND 2.5 bn  - improving VND 830.9 mn (51.1%) linked quarter. While we have always believed Techombank to be the best house in a bad neighborhood, these numbers make little sense in light of the COVID-19 pandemic which has eviscerated the performance of every other bank that we follow. Reviewing the Techombank result announcement, the numbers suggest that while loss provisions increased 151% linked quarter Techombank posted incredibly positive operating jaws – with revenues increasing 25.5% and costs contracting 0.4%;*Credit Substantially Weaker:In reviewing the problem loan book, Techombank’s figures simply don’t add. We find that  - despite its challenges in properly classifying problem assets – net new NPLs actually increased VND 2.8 bn or almost 92% on an annualized basis – which is quite high; and*Provisions Set To Increase From Here: While we give Techombank credit for increasing its loss provisioning efforts by VND 464.2 mn (151%) linked quarter, the level of provisioning seems far from inadequate for the known and potential risk in this loan portfolio. It is disappointing to see that a name such as Techombank is pulling on credit levers and playing the earnings growth game. By our calculation, loss provisions should have been closer to VND 3.5 bn in 1Q20 alone which would bring earnings into a more realistic area of VND 500 mn or 20% of stated results.

Thematic (Sector/Industry)

<ul>
<li>
 Fitch Bank Downgrades: Fitch Ratings (Fitch) has finally gotten around to revising the outlook of the long-term issuer default ratings from Positive to Stable on two state-owned banks and a wholly foreign-owned bank in Vietnam, and the outlook of two JSC banks from Stable to Negative;</li>
<li>
Fitch Concerns: The downgrades stem from sharply lower growth in Vietnam associated with the corona virus pandemic which likely will negatively impact commercial bank credit profiles over the near-term.  Thin capital buffers are another area of concern, as some major banks still struggling to comply with local Basel II requirements. Credit stresses, even if not all are reported as impaired during the relief period, suggest that credit impairments accruing; and</li>
<li>
Our Continued Concerns: We continue to find that net new NPL growth ranges between 50%-150% per annum over the past five years through 2019 – despite the stated NPL figure declining on a growthy loan portfolio and placement of problem loans below the line. Capital requirements under Basel II being extremely difficult to attain/maintain without prospects of capital raise or shrinking their balance sheets, commercial banks are set to continue to struggle to grow.</li>
</ul>



 Fitch Bank Downgrades: Fitch Ratings (Fitch) has finally gotten around to revising the outlook of the long-term issuer default ratings from Positive to Stable on two state-owned banks and a wholly foreign-owned bank in Vietnam, and the outlook of two JSC banks from Stable to Negative;

Fitch Concerns: The downgrades stem from sharply lower growth in Vietnam associated with the corona virus pandemic which likely will negatively impact commercial bank credit profiles over the near-term.  Thin capital buffers are another area of concern, as some major banks still struggling to comply with local Basel II requirements. Credit stresses, even if not all are reported as impaired during the relief period, suggest that credit impairments accruing; and

Our Continued Concerns: We continue to find that net new NPL growth ranges between 50%-150% per annum over the past five years through 2019 – despite the stated NPL figure declining on a growthy loan portfolio and placement of problem loans below the line. Capital requirements under Basel II being extremely difficult to attain/maintain without prospects of capital raise or shrinking their balance sheets, commercial banks are set to continue to struggle to grow.


* Head Start On Economic Return to Normalcy: Vietnam Technological and Commercial Bank (TCB.VN) [Techcombank] is a long-term winner in the Vietnamese banking sector. Techcombank is Vietnam's largest joint stock bank by operating income and PBT – remaining the country’s most profitable bank from an ROA perspective despite having only a 3% deposit market share. Techombank is also the leader in mortgage, bancassurance, credit cards, and investment banking;  * Sector Credit Risks Are High: As we review each bank individually we continue to find that net new NPL growth ranges between 50%-150% per annum over the past five years through 2019 – despite the stated NPL figure declining on a growthy loan portfolio and placement of problem loans below the line. In our view, Vietnam has essentially done very little to address its legacy NPLs - which we estimate to be over USD 50 bn or 20% of total loans – and the SBV’s newly adopted “extend and pretend” policy will be substantially additive to the current heap of problem assets even if not labelled such; and* Capital Pressures Rising: With almost no end in sight to the growth of net new NPLs (doubling every year), and capital requirements under Basel II being extremely difficult to attain/maintain without prospects of capital raise or shrinking their balance sheets, commercial banks are set to continue to struggle to grow. The draft amendments to a Decree for tax payment deferral and the SBV’s request not to pay a cash dividend confirms Basel II compliance pressures.

* Head Start On Economic Return to Normalcy: Vietnam Technological and Commercial Bank (TCB.VN) [Techcombank] is a long-term winner in the Vietnamese banking sector. Techcombank is Vietnam's largest joint stock bank by operating income and PBT – remaining the country’s most profitable bank from an ROA perspective despite having only a 3% deposit market share. Techombank is also the leader in mortgage, bancassurance, credit cards, and investment banking;  * Sector Credit Risks Are High: As we review each bank individually we continue to find that net new NPL growth ranges between 50%-150% per annum over the past five years through 2019 – despite the stated NPL figure declining on a growthy loan portfolio and placement of problem loans below the line. In our view, Vietnam has essentially done very little to address its legacy NPLs - which we estimate to be over USD 50 bn or 20% of total loans – and the SBV’s newly adopted “extend and pretend” policy will be substantially additive to the current heap of problem assets even if not labelled such; and* Capital Pressures Rising: With almost no end in sight to the growth of net new NPLs (doubling every year), and capital requirements under Basel II being extremely difficult to attain/maintain without prospects of capital raise or shrinking their balance sheets, commercial banks are set to continue to struggle to grow. The draft amendments to a Decree for tax payment deferral and the SBV’s request not to pay a cash dividend confirms Basel II compliance pressures.

Techombank – Still Vietnam’s Best House In A Bad Neighborhood

Bank For Investment And Deve / Equity Bottom-Up

<ul>
<li>
One For the Ages: The Bank for Investment and Development of Vietnam (BID.VN) [BIDV] held a somewhat delusional 2020 Annual General Meeting (AGM). In February 2020, BIDV became the 12th bank to clear its balance due to the VAMC, just as credit quality is likely to take a massive turn for the worse. No doubt it will be hitting up the VAMC for more bonds near-term. To that end, BIDV has already committed to expand its loan bailout to VND 120 tn. BIDV was unfortunately among the Basel II non-compliant despite the sale of a 15% stake to KEB Hana Bank (086790.KS). 2020 forecasts are in the stratosphere and need to come back to earth.</li>
<li>
Reality Check Needed For Vietnam: Fitch Ratings (Fitch) recently lowered Vietnam’s GDP growth to 6.3% from 6.8% in 2020. Given the symbiotic economic relationship between mainland China and Vietnam, we find the Fitch’s GDP growth forecast to be incredibly generous as crisis conditions typically suggest negative GDP growth. The IV Board survey revealed that nearly 30% surveyed had lost between 20-50% of revenues associated with the corona virus, while 60% had lost revenues by over half.  It also suggested that six months of this economic weakness could lead to 74% of surveyed companies to become bankrupt.</li>
<li>
Liquidity Wall: Vietnam is running into a liquidity wall. The sovereign has a high level of public debt (near its 65% debt/GDP cap) – and now growing - which constrains spending while the banking system (as it converts over to the more stringent Basel II capital regime) remains saddled with troubled debt which too has reversed its downward trend - resulting in systemic balance sheet and liquidity constraints.</li>
</ul>



One For the Ages: The Bank for Investment and Development of Vietnam (BID.VN) [BIDV] held a somewhat delusional 2020 Annual General Meeting (AGM). In February 2020, BIDV became the 12th bank to clear its balance due to the VAMC, just as credit quality is likely to take a massive turn for the worse. No doubt it will be hitting up the VAMC for more bonds near-term. To that end, BIDV has already committed to expand its loan bailout to VND 120 tn. BIDV was unfortunately among the Basel II non-compliant despite the sale of a 15% stake to KEB Hana Bank (086790.KS). 2020 forecasts are in the stratosphere and need to come back to earth.

Reality Check Needed For Vietnam: Fitch Ratings (Fitch) recently lowered Vietnam’s GDP growth to 6.3% from 6.8% in 2020. Given the symbiotic economic relationship between mainland China and Vietnam, we find the Fitch’s GDP growth forecast to be incredibly generous as crisis conditions typically suggest negative GDP growth. The IV Board survey revealed that nearly 30% surveyed had lost between 20-50% of revenues associated with the corona virus, while 60% had lost revenues by over half.  It also suggested that six months of this economic weakness could lead to 74% of surveyed companies to become bankrupt.

Liquidity Wall: Vietnam is running into a liquidity wall. The sovereign has a high level of public debt (near its 65% debt/GDP cap) – and now growing - which constrains spending while the banking system (as it converts over to the more stringent Basel II capital regime) remains saddled with troubled debt which too has reversed its downward trend - resulting in systemic balance sheet and liquidity constraints.


BIDV – KEB Hana Has To Be Kicking Itself Now

<ul>
<li>
Liquidity Wall:Vietnam is running into a liquidity wall - despite the perception of a positive local investment thesis.  The sovereign has a high level of public debt (near its 65% debt/GDP cap) which constrains spending while the banking system as it converts over to the more stringent Basel II capital regime remains saddled with troubled debt - resulting in systemic balance sheet and liquidity constraints.</li>
<li>
Plans Not Working: Despite the government's half-baked plans to have the Vietnam Asset Management Corporation (VAMC) to offer accounting gimmickry to the banking sector along with the failed plan to privatize the largest state-owned enterprises (SOEs) via the Committee to Manage State Capital at Enterprises (CMSC), this factors are taking a toll on some of Vietnam's largest companies.</li>
<li>
Two Large Troubled Names:  VinGroup (VIC.VN), Vietnam's largest company plans to issue its first THB-denominated bonds after exhausting all of its local funding options in Vietnam and exiting various businesses.  Novaland (NVL.VN) is one of Vietnam's largest real estate developers, which has been under scrutiny for projects with a questionable land-bank acquisition history. </li>
</ul>



Liquidity Wall:Vietnam is running into a liquidity wall - despite the perception of a positive local investment thesis.  The sovereign has a high level of public debt (near its 65% debt/GDP cap) which constrains spending while the banking system as it converts over to the more stringent Basel II capital regime remains saddled with troubled debt - resulting in systemic balance sheet and liquidity constraints.

Plans Not Working: Despite the government's half-baked plans to have the Vietnam Asset Management Corporation (VAMC) to offer accounting gimmickry to the banking sector along with the failed plan to privatize the largest state-owned enterprises (SOEs) via the Committee to Manage State Capital at Enterprises (CMSC), this factors are taking a toll on some of Vietnam's largest companies.

Two Large Troubled Names:  VinGroup (VIC.VN), Vietnam's largest company plans to issue its first THB-denominated bonds after exhausting all of its local funding options in Vietnam and exiting various businesses.  Novaland (NVL.VN) is one of Vietnam's largest real estate developers, which has been under scrutiny for projects with a questionable land-bank acquisition history. 


Vietnam

Military Commercial Joint Stock Bank offers commercial banking services.  The Bank provides services in the areas of personal banking, corporate banking, financial banking, and e-banking.  Military Commercial's services include savings accounts, money lending, money transfers, foreign exchange, and money markets.

Military Commercial Joint Stock Bank (MBB VN)

Vietnam Prosperity Joint Stock Commercial Bank (VPBank) provides commercial banking services. The Bank offers domestic remittance services, savings account, personal loans, e-banking, trade financing, deposits, tax payment, foreign exchange, cash management, and other banking services. VPBank serves customers in Vietnam.

Ho Chi Minh Development Joint Stock Commercial Bank provides commercial banking services for retail and institutional customers. The Bank offers personal and car loans, overdraft, business financing, term deposits, current accounts, mobile banking, and online bills payment services. Ho Chi Minh Development serves customers in Vietnam.

Saigon Thuong Tin Commercial Joint-Stock Bank, known as Sacombank, operates various personal and corporate banking services such as deposits, foreign exchange transactions, loans, outward transfer, and international payments.

Vietnam Technological and Commercial Joint-stock Bank, doing business as Techcombank, provides banking services. The Bank offers savings, deposits, loans, credit cards, monetary management, trade finance, international payment, and foreign exchange services. Techcombank serves individuals, corporates, and the government sectors in Vietnam.

Vietnam Joint Stock Commercial Bank For Industry and Trade accepts deposits and offers commercial banking services.  The bank offers corporate and consumer loans; insurance; securities and derivatives brokerage; lease financing; money transfer; credit cards; and other services

Vietnam Joint Stock Commercial Bank For Industry and Trade (CTG VN)

Vietnam Joint Stock Commercial Bank For Industry and Trade

Saigon - Hanoi Commercial Joint Stock Bank provides commercial and personal banking services.

Vietnam Export Import Commercial Joint Stock Bank provides various banking services and products to organizations and individual customers in Vietnam. The company offers demand, savings, time, overnight, accumulated, and payment deposits; deposits with preferential, tiered, and daily interest rates; deposits with optional terms; and certificates of deposit. It also provides housing loans, loans for small traders, loans secured by savings books and valuable papers, loans for securities trading and investments, T-day securities loans, overseas study loans, auto loans, unsecured loans for employees, overdrafts, and loans by investment projects; factoring services; and prepaid, debit, credit, co-branded cards. In addition, the company engages in foreign currency trading by spot, swap, forward, and currency options and gold trading; provides money transfer and remittance services; packaging services for overseas studies; Internet, mobile, and SMS banking services; and bill payment services, such as electricity, water, air ticket, and automatic bill payment services, as well as telecommunication charge payment and collection services. Further, it offers centralized deposit management, payroll, and cash services; payment of travelers� cheques, and cheque issuance and collection; international settlement services. Additionally, the company engages in the receipt of funds entrusted for investment; receipt of funds from domestic and foreign credit institutions; discount of commercial papers, state bonds, and valuable papers; investment in securities; issuance of domestic and international cards; financial advisory services; corporate bond trading; and other banking services. As of December 31, 2014, it operated a network of 208 banking units, including 44 Branches, 163 transaction offices, and 1 savings fund. The company was founded in 1989 and is headquartered in Ho Chi Minh City, Vietnam.

National Citizen Commercial Joint Stock Bank provides various banking products and services for individuals and businesses in Vietnam. It offers term deposits, bank accounts, and other deposit products; and debit and credit cards. The company also provides loans for buying automobiles; short-term loans for business and production; loans for household items, travel, weddings, healing, and the other necessities of life; investment factory, warehouse, and office loans; home repair, overdraft, working capital, investment in machinery and equipment, and unsecured consumer loans; loans to buy capital property and land plots; and import commodity financing, as well as loans covering tuition fees and living costs for students. In addition, it offers overseas and domestic money transfer; foreign currency exchange; Western Union; phone recharge; and Internet, mobile, and phone banking services, as well as online payment services. The company was formerly known as Nam Viet Commercial Joint Stock Bank and changed its name to National Citizen Commercial Joint Stock Bank in May 2014. National Citizen Commercial Joint Stock Bank was founded in 1995 and is headquartered in Hanoi, Vietnam.

Bank for Investment and Development of Vietnam provides commercial banking services. The Company offers deposits, personal loans, e-banking, guarantees, and trade finance for customers, corporate, and financial institutions. Bank for Investment also offers foreign exchange, money market, derivatives, and debt market services.

Bank of Ayudhya Public Company Limited provides a full range of banking and financial services.  The Bank offers corporate and personal lending, retail and wholesale banking, international trade financing, asset management and investment banking services, to customers through its nationwide branches. It also has branches in Hong Kong, Vietnam, Laos, and Cayman Islands.

Columbia Banking System, Inc. is the holding company for Columbia Bank, a full service commercial bank.  The Bank serves small and medium-sized businesses, professionals, and other individuals through office in the Tacoma metropolitan area and contiguous parts of the Puget Sound region of Washington, as well as the Longview and Woodland communities in southwestern Washington.

International Bancshares Corporation, through its bank subsidiaries, provides commercial and retail banking services through offices in south and southeast Texas.  The Bank accepts deposits from the general public and uses those funds to make a variety of loans.

First Financial Bankshares, Inc. is a multi-bank holding company. The Company operates several banks located in Texas. The Banks accept deposits, originate loans, transmit funds, and perform other banking services.

Glacier Bancorp, Inc. is a multi-bank holding company.  The Banks attract deposits from the general public and use those funds to originate a variety of commercial and consumer loans.

Metropolitan Bank & Trust Company offers commercial and investment banking services. The Bank's business activities include borrowing and lending, trade finance, remittances, treasury, investment banking and savings.

Huishang Bank Corporation Limited is a commercial bank. The Bank provides banking services including loans, money market operations, treasury business, investment and trading services, and valet transactions.

Bendigo and Adelaide Bank Limited offers a variety of banking and other financial services, including first mortgage housing finance, retail and business banking, commercial finance, funds management, treasury and foreign exchange services, superannuation and trustee services. Bendigo also offers internet banking.

Fukuoka Financial Group, Inc. is a holding company established through the merger of the Bank of Fukuoka and Kumamoto Family Bank. As a financial group, the Company provides banking services including deposits, loans, foreign currency transactions. The Company also provides other financial services such as credit card, letter of credit, and leasing services.

Punjab & Sind Bank is a commercial bank. The Bank offers its customers a wide range of banking products and services.

Asia Commercial Bank attracts deposits and offers commercial banking services.

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Asia Commercial Bank/Vietnam (ACB VN)

Techombank – A Little Hocus Pocus

*Silly Season at Techombank:Vietnam Technological and Commercial JSB (TCB.VN) [Techombank] was able to post a 1Q20 result of VND 2.5 bn -...

Thomas J. Monaco

Vietnam – Fitch Downgrades Banks

Fitch Bank Downgrades: Fitch Ratings (Fitch) has finally gotten around to revising the outlook of the long-term issuer default ratings from...

Thomas J. Monaco

Techombank – Still Vietnam’s Best House In A Bad Neighborhood

* Head Start On Economic Return to Normalcy: Vietnam Technological and Commercial Bank (TCB.VN) [Techcombank] is a long-term winner in the...

Thomas J. Monaco

BIDV – KEB Hana Has To Be Kicking Itself Now

One For the Ages: The Bank for Investment and Development of Vietnam (BID.VN) [BIDV] held a somewhat delusional 2020 Annual General Meeting...

Thomas J. Monaco

Vietnam - Wheels Are Falling Off

Liquidity Wall:Vietnam is running into a liquidity wall - despite the perception of a positive local investment thesis. The sovereign has a high...

Thomas J. Monaco

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