Many investors now believe that PGB is being inflated because the price of PGB shares is even surpassing that of many of the big banks such as Asia Commercial Bank (ACB), Sacombank (STB), Vietnam Prosperity Joint Stock Commercial Bank (VPB), and Techcombank.
Low asset quality
At the end of 2022, PG Bank was still a small-scale bank with total assets of only VND 49,000 bln. Outstanding loans at PG Bank mainly come from corporate customers, accounting for 56 percent of total loans at the end of 2022. Currently, PG Bank has expanded its customer network to many other businesses such as with Vietnam National Petroleum Group (Petrolimex) and its related companies. Where personal loans are concerned, PG Bank mainly focuses on home loans which are 63 percent of its portfolio.
PG Bank business results in 2022 improved significantly when it recorded a net profit of VND 404 bln, mainly due to a 90-basis point increase in Net Interest Margin (NIM) and Cost to Income Ratio (CIR) decreasing significantly, from 57 percent in 2021 to 49 percent. Credit growth has been quite modest at only 4 percent due to a decrease of 7.5 percent in the main lending segment of corporate customers, while lending to individual customers increased by 30 percent. By expanding on personal loans, PG Bank saw NIM improve significantly, from 2 percent in 2021 to 2.9 percent.
However, despite improvement in business operations, PG Bank asset quality has not yet recorded an improvement. At the end of 2022, PG Bank total loan balance at Vietnam Asset Management Company (VAMC) was at VND 951 bln, of which VND 350 bln was set aside and recovered. The remaining amount will be set aside and recovered within the next three years. But in the current situation, this goal seems very difficult. Also at the end of 2022, outstanding loans for real estate businesses were at VND 2,000 bln, and construction loans were at VND 3,000 bln. These are alarming numbers for PG Bank which has a charter capital of only VND 3,000 bln. If compared to many other listed banks of similar size, the asset quality of PG Bank is also quite low.
Loss of major shareholder
At the end of 2022, PG Bank charter capital had reached VND 3,000 bln, the lowest among banks of the same size. The reason for this is that since 2012, Petrolimex has been planning to divest from PG Bank to focus on its core business. This deal lasted for nearly 11 years, but now PG Bank has not been able to find another suitable strategic partner, leading to a delay in increasing capital to expand its scale.
According to an analysis of VNDirect Securities (VNDS), the fact that Petrolimex has not been able to divest PG Bank also brings many advantages to the bank. As a major shareholder, Petrolimex has supported the bank a lot in its business activities. For instance, from 2013 until now, PG Bank has taken advantage of the Petrolimex network, including more than 2,600 gas stations, to deploy the Flexipay service which allows customers to transfer money at petrol stations. In addition, PG Bank also cooperates with 184 subsidiaries and partners of Petrolimex, thereby having access to individual customers through salary payment of employees, bringing demand deposits to the bank.
According to VNDS, the dependence on Petrolimex customer file caused this divestment to raise concerns about PG Bank activities and its business performance in the future. Deposits, loans, underwriting, or payment services at gas stations will be directly impacted by this deal.
Overpriced shares
From the above analysis, it can be seen that PG Bank is under great pressure from the divestment deal of Petrolimex. The Board of Directors of PG Bank took into account this difficulty when planning the business in 2023 with a rather modest profit growth. Specifically, the loan plan is set at VND 35,881 bln and total operating income at VND 1,785 bln, but profit before tax only at VND 530 bln, up by just 4.7 percent.
On 7 April, Petrolimex divested all 120 million shares in a public auction, with a starting price of VND 21,300 per share. The last bidding result had four winning investors, of which three were institutional investors, and one was an individual investor. The highest winning price was at VND 21,500 per share, only VND 200 higher than the starting price of VND 21,300 per share. The average winning price was VND 21,400 per share, with the total value of shares sold at VND 2,568 bln.
After the Petrolimex auction, the PGB code was pulled up to the surprise of investors, with many investors suspecting that this stock was being inflated. By the trading session on 12 April, PGB increased to VND 37,000 per share. At this price, PGB is only behind Vietcombank (VCB) and Bank for Investment and Development of Vietnam (BIDV) but surpasses many other bigger banks such as Sacombank (STB), Techcombank (TCB), Tien Phong Bank (TPB), and Maritime Bank(MSB). Although PGB later fell to VND 32,000 per share, investors still believe this rise was very unreasonable.
