Hanoi (VNS/VNA) - With average price-to-earnings (P/E) and price-to-book (P/B)ratios at a five-year low, bank stocks are among the good options available forinvestors right now, analysts said.

Accordingto Mirae Asset Vietnam Securities, average P/E and P/B ratios of the bankingsector are 15.3 and 1.3, the lowest in five years.

Thesector has moved in the same direction with the Vietnamese stock market’sbenchmark VN-Index since the beginning of the year.

BetweenJanuary 30 and March 23, both VN-Index and bank stocks were hit hard overworries about the socio-economic impact of the coronavirus pandemic COVID-19.

Bankstocks were once forecast to suffer from banks’ earnings as the virus spreadwhich would see an increase in bad debt ratios, hike risk provisions and lowerprofits.

Bankswere also asked to offer low interest lending packages to Vietnamese companiesto help them cope with the effects of COVID-19.

Thesefactors were the main causes for bank stocks’ sharp decline in the firstquarter.

Theheavyweight Vietcombank shares (VCB) lost as much as two-fifths in the firstthree-month period. Others such as Bank for Investment and Development ofVietnam (BID), Vietinbank (CTG) and Military Bank (MBB) shed as much as 44.5 percent,38 percent and 40 percent, respectively, in January-March.

Thelocal market has bounced back strongly since early April, and bank stocks arestill the driving factor.

Sharesof Vietcombank, BIDV, Vietinbank and MBBank have gained substantially by 22.8-39.2percent since March end while the benchmark VN-Index has jumped nearly 30 percentafter bottoming at the three-year low of 660 points on March 24.

Theworst scenarios for the pandemic have priced in local bank stocks and thecurrent circumstance is not as bad as predicted, analysts have said.

Vietnamhas done well to contain the virus and it makes investors less doubtful aboutthe economic growth prospects, said Quan Trong Thanh, director of marketanalysis and institutional investors at Maybank Kim Eng Securities (MBKE).

“First-quarterearnings by banks are not too bad,” he said. “Banks are expecting their profitsthis year will fall a maximum of 10 percent year-on-year and they are preparedfor the rest of the year.”

Dataat the Republic of Korea-invested firm shows banks’ annual post-tax profitgrowth in 2020 may be at the three-year low of 3.4 percent. Credit growth inthe first three months was only 1.3 percent, the lowest in six years.

Earningsmay not increase sharply in the remaining months of the year as lending revenuefalls, bad debt ratios rise and risk provisions are up to help local firmsrecover. In addition, economic and business activities will still be stagnantin the rest of the year.

“Theworst time is perhaps over,” said Le Quang Minh, director of market analysis atMirae Asset Vietnam Securities.

“Thedisease is well-controlled, social distancing rules are loosened, and companiesreturn to operation. Those will boost capital demand.”

TheGovernment is doing its best to disburse economic stimulus solutions, includingthe loosening of monetary policies and enhancement of public investment, toboost consumption and investment, he said.

Besides,the central bank has committed to assuring the liquidity of the economy andkept cutting reference lending rates, encouraging banks to loan out at lowerinterest rates, Minh said.

OnMay 13, the State Bank of Vietnam made its third rate cut since September 2019.Saving rates were curbed to 0.2 percent per annum for one-month term and 4.25 percentper annum for one to six-month terms. Lending rates for prioritised sectorswere also reduced.

Dataprovided by the central bank shows that at the end of April, banks had loweredtheir lending rates by 50-300 basis points for nearly 19 percent of totalloans. If the pandemic is completely controlled at the end of June, averagelending rates will drop 40 basis points, Thanh at MBKE said.

Ina recent report, VNDirect Securities Corporation (VNDS) said the six-year-lowcredit growth rate of 1.3 percent in the first quarter was a big improvementfrom the credit growth of only 0.06 percent recorded at the end of February.

“TheGovernment's policies to support the economy, such as cutting policy rates,allowing the deferral of tax payments, and banks' support in the form ofextending loan tenure, reducing and waiving interest obligations, have helpedcredit growth a bit,” the company said.

“Thecountry's prompt response to the pandemic has helped to contain its spread,thereby reducing its impact on the economy.”

Ifthe coronavirus is contained in June, so credit growth will pick up in thesecond half of the year, VNDS said. “We forecast credit growth for the year toreach 11 percent.”/.