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UPCoM market set to roll   2009-07-28 - VNS

Before the UPCoM for unlisted public shares officially started operation, SCB of Saigon Commercial JS Bank was one share code attracting a great deal of attention from traders. However, due to the issues relating to securities trading of foreign investors, SCB could not finalise the listing application on UPCoM, which made any investors disappointed. Why did investors set such a high expectation in SCB?

Former Que Do Bank established in 1992 with an initial chartered capital of 10 billion dong, till the end of 2008 SCB reached total assets of 38.596 trillion dong and chartered capital of nearly 2.181 trillion dong with a goal to become multi-purpose commercial bank focusing on banking retail through the strategies to develop banking services and pay attention to e-banking and international banking

There are now five banks listing on the formal market, a small figure compared with a large volume of banks operating in Vietnam. Meanwhile, bank shares always are regarded as "king shares" with the highest liquidity on the market. If listed on UPCoM, SCB will be the first bank joining the playing ground with the capitalisation of 6.188 trillion dong -- higher by three times than UPCoM's total capitalisation and become the leading share of UPCoM like ACB at Hanoi Stock Exchange (HNX).

Ending the first quarter of 2009, SCB posted 39.921 trillion dong in total assets, increasing 3.4 percent from Q4 of 2008, 163.887 billion dong in pre-tax profit, fulfilling 18.32 percent of 2009's plan.

Credit accounted for over 612 percent of SCB's asset structure, followed by securities investment with more than 11 percent. The disadvantage of SCB is heavy dependence on credit activity with high potential risks. The bank also invested too much in debt tools (mainly securities back loans are provided to domestic issuers in Q3 of 2008). A large volume of shares issued by Vincom and An Dong Investment JSC to develop property projects now is held by SCB. An Dong Co's bonds are secured by land using right and real estate works while the five year loan with a floating lending rate to Vincom have no secured assets.

In next five years, the real estate market is forecasted to warm up so SCB's investment in these bonds is not expected to overly risky.

SCB's total deposits attained 34.445 trillion dong in Jan-March, a slight dip from the same period of last year due to the difficulties in the finance market along with the low basic rate of Q1. In previous years, SCB used to reach the highest capital mobilisation growth among the same sized banks.

In comparison with listed banks, SCB's operation and structure are nearly like SHB's. However, regarding the scope, SCB has total assets of higher three times than SHB's. The Q1 EPS and ROE of SCB were 375 dong and 2.83 percent while SHB's were 303 dong and 2.58 percent.

SCB recently released the Q2 business results with total assets of 43.325 trillion dong, a year-on-year growth of 32.55 percent, average chartered capital and funds amounting to 3.537 trillion dong, jumping 70.75 percent over 2008., total deposits of 37.654 trillion dong, up 31.16 percent, total outstanding loans of 27.073 trillion dong, rising by 28.36 percent, pre-tax profit of over 308 billion dong, up 18.2 percent year-on-year but reaching only 42.22 percent of 2009's target.

In the rest of 2008, SCB expects to post a higher profit growth because of rising capital demand of both enterprises and individuals in upcoming holidays and Lunar New Year.

Generally, in Jan-June, the whole credit system's total outstanding loans grew by 17 percent from last December under the ruled growth of 30 percent for this year. This meant that from now to the year end, the credit growth is disallowed to exceed 13 percent. State Bank of Vietnam also released monetary tightening up policies and enhanced consumer lending at banks.

From August 1, the compulsory deposit reserve ratio of the dong applied on credit institutions is reduced from 3.6 percent to 1.2 percent pa, leading to a reduction in banks' profit earned from the reserved deposits at SBV.

With the current trading price of 15,800-17,500 dong per share on the informal stock market, keeping SCB coded shares will be profitable. Especially, after obtaining permission to go on UPCoM, SCB promises to become one blue chip leading the market.

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