Asia Commercial Bank (ACB) usually commands a higher valuation than that of the other banks due to its reputation, generally well deserved, that it is the best managed and most efficient bank in Vietnam. In addition, it is also known to be rather prudent in lending. Hence, it has the best asset quality and lowest rate of bad loans among the Vietnamese banks.
The only problem for the bank are that it has just completed its aggressive growth phase and growth going forward will be slower than the other banks like Military Bank, Eximbank or Techcombank. In 2010, the company also lost a valuable stream of income from Gold trading floors when they were closed down.
The other problem is that the foreign room of the bank is full so if you're not a Vietnamese, then very sorry, you cannot buy any shares!
As you can see from the table above, ACB was able to maintain good ROA and ROE throughout the last 10 years of operation, even through the last 5 years which was bad from the economic point of view for Vietnam. Few banks in Vietnam have achieved this type of consistency in financial performance and this attests to the good management that ACB has.
NIM is only average however. I believe this is because ACB has not been so aggressive like the other joint stock banks in opening new branches to actively woo depositors. Nevertheless, despite this, they were able to maintain good ROEs.
One thing is that ACB actively sources for new sources of fee based income. Previously it operated highly successful gold trading floors but as the latter was closed by the government, they are now actively developing their credit card business.
Growth rates are average when compared to the other Vietnamese banks that are listed. I believe that this is again due to the fact that the company has not been aggressive in opening branches. In addition they had been quite prudent in giving out loans as well. As such loan growth is moderate only when compared with other banks.
Notwithstanding the fact that foreign investors are not able to buy shares of ACB, the share price had so far been stagnant because I feel that the company does not seem to be growing very quickly. Of course, there is no question that ACB is growing very prudently. Currently, ACB is one of, if not the most prudent bank in Vietnam.
If we are in the heady days of 2007, I believe prudence will be in order. However, Vietnam as a country is growing very quickly as a whole and the market is coming out of a deep recession. In my opinion, now is the time to take a bit of risk for the chance to grow faster. I would favor a faster growing bank any day. In fact, I feel that at this time, a bank should be aggressively growing not only organically but also by acquisitions if necessary, to turbocharge their growth and take advantage of the cheap assets and bank equity prices now. There are banks still trading below their book values and well capitalized banks like ACB will be missing out if they do not take this chance to grow as fast as possible.
In our next post, we will have a look at Saigon Hanoi Bank, a tiny bank compared to ACB with a less illustrious reputation but a far more aggressive (albeit less prudent) history of growth. If prudence is the watchword of ACB, Saigon Hanoi Bank will be growth.