Valuing stocks of commercial joint stock banks - The case of Sacombank Đặng Quốc Hiệp Khoa Quản trị Kinh doanh Luận văn Thạc sĩ ngành: Kinh doanh quản lý; Mã số: 60 34 05 Người hướng dẫn: TS Chu Thành, NCS Hà Nguyên Năm bảo vệ: 2010 Keywords: Ngân hàng; Quản trị kinh doanh; Cổ phiếu; Quản lý tài Content TABLE OF CONTENTS ACKNOWLEDGEMENTS i ABSTRACT ii TOM TAT iv List of tables viii List of figures viii List of abbreviations .ix INTRODUCTION CHAPTER 1: COMMERCIAL JOINT STOCK BANKS: INTRODUCTION TO VALUATION OF STOCK 1.1 The introduction of commercial joint stock banks Commercial bank- an important intermediary financial institution 1.1.1.1 The definition of commercial banks 1.1.1.2 The financial intermediary role of commercial banks 1.1.1 The organization and operation of commercial banks 1.1.2.1 Organization and management of commercial banks 1.1.2.2 Capital of commercial joint stock banks 1.1.2.3 Some basic criteria for evaluating the operation efficiency of commercial joint stock banks 13 1.2 Legal bases and stock valuation methods 15 1.2.1 Concept of stocks and valuing stocks 15 1.2.1.1 Concept of stocks 15 1.2.1.2 The concept of valuing stocks 16 1.2.2 The legal bases for valuing stocks in Vietnam 16 1.2.2.1 1.2.2.2 1.2.2.3 1.2.2.4 Some regulations of stock valuation 18 Regulations of valuation methods 19 The regulations of land usage right 23 The regulations of specifying the advantage values The stock valuation methods: 25 1.2.3.1 The method of dividend discount model (DDM model) 28 1.2.3.2 The discounted cash flow method (DCF) 36 1.2.3.3 The valuation method based on P/E 39 1.2.3.4 The assessment method based on the value of net assets 41 1.2.3.5 The valuation method based on P/B 42 1.2.3.6 Methods to assess banking stock 43 CHAPTER 2: ANALYSIS OF COMMERCIAL BANK STOCK VALUATION - THE CASE OF SACOMBANK 45 The establishment and development of commercial joint stock banks in Vietnam 45 2.1 General introduction of Sacombank: 46 2.2.1 Sacombank stock: 46 2.2.2 Some general features of Sacombank: 48 2.2.2.1 Operational cirteria of Sacombank during 2005-2009 49 Asia banking sector overview and forecast: 51 Valuation analysis on the stock STB 53 Valuing the stock STB with DDM method 53 Valuing the stock STB with the method of P/E coefficient: 56 2.3.1 Valuing STB with the method of net value of assets: 57 2.3.2 Analyzing the P/B coefficient of STB as of year end 2009: 58 2.2 Evaluating the results of valuing the stock STB 59 Advantages and difficulties in valuing stocks of Vietnamese commercial joint stock banks 60 2.6.1 Advantages in valuing stocks: 60 2.6.2 Difficulties in valuing stocks 61 2.6.2.1 Difficulties from commercial banks themselves 61 2.6.2.2 Difficulties from the business environment 62 2.6.2.3 The lack of understanding of investors 66 2.6 Major lessons taken out of Sacombank 67 CHAPTER 3: SOLUTIONS & RECOMMENDATIONS TO ENHANCE/ IMPROVE STOCK VALUATION OF COMMERCIAL BANKS IN VIETNAM 71 Implications for other banks 71 Recommendations to enhance the quality of banking stockvaluation 74 Recommendations to commercial banks: 74 3.2.1.1 Developing business strategies and long term financial plans 74 3.2.1.2 Complying with rules and accounting standards 75 3.2.1.3 Setting up expertise departments for valuing stocks 75 3.2.1.4 Performing the information announcement 75 3.2.1 Recommendations to the government 76 3.2.2.1 Improving the legal framework for valuation and system of related legal documents 76 3.2.2.2 Methods related to the market information 80 3.2.2 Recommendations to investors 83 CONCLUSION 85 LIST OF REFERENCES 87 Appendix 1: Country Default Spreads and Risk Premiums 90 Appendix 2: Asia banking sector peer comparison 94 References: Prof Meritorious Teacher Dinh Xuan Trinh, Associate Prof Nguyen Thi Quy, “ Securities Market", Statistics Publishing House, Hanoi 2005 Econometrics - Associate Prof PhD Nguyen Quang Dong, Statistics Publishing House, Hanoi 03-2003 Associate Prof PhD Nguyen Van Nam, Associate Prof PhD Vuong Trong Nghia, “Material on Securities market", Finance Publishing House 2002 Frederic S.Mishkin, “Banking money and Securities market", Science and Technology Publishing House 2001 Associate Prof PhD Luu Thi Huong, “Material on Enterprise’s Finance" Statistics Publishing House 2004 Nguyen Hai San, “Material on Enterprise’s Finance", Statistics Publishing House 2001 MA Le Thi Mai Linh, “Material on Securities Investment", National Political Publishing House, Hanoi 2003 Associate Prof PhD Nguyen Thi Mui, “Management of Commercial banks”, Finance Publishing House, Hanoi PhD Vu Thi Kim Lien, “Scientific bases on stock valuation methods in the Vietnamese Securities market", The PhD Thesis 2003 10 Vu Thanh Tu Anh, “Operations of Commercial banks”, The Fulbright 2004 Economic Curriculum", The lesson of Development Finance 11 PhD Phan Thi Thu Ha, PhD Nguyen Thi Thu Thao, “Commercial banks- Management and Operations", Statistics Publishing House 2002 12 Nguyen Minh Tri, High business Efficiency in the early months and the plan of increasing chartered capitals of commercial joint stock banks, “Money Finance Market No 12 (234) 15/06/2007 13 MA Pham Ngoc Lan, Equitization and Increase in chartered capitals of commercial banks - Money Finance Market No3+4 (249+250) 01/02/2008 14 Le Ba Hoang Quang, Banks’ stocks through some financial criteria, Securities Investment No 49 (521) 09/08/2007 15 Decree 187/2004/ND- CP issued on 16/11/2004 about transferring some State owned Enterprises to joint stock companies 16 Circular No 126/2004/TT-BTC of Ministry of Finance issued on 24/12/2004, instructing how to perform decree 187 17 Circular No 95/2006/TT-BTC amending, supplementing the Circular No 126/2004/TTBTC instructing how to perform the decree 187 18 Decree 109/2007/ND- CP issued on 26/06/2007 about transferring some State owned Enterprises to joint stock companies 19 Circular No 146/2007/TT-BTC of Ministry of Finance issued on 06/12/2007, instructing how to perform the decree 109 20 Tran Viet Thang, Dinh Nhu Duc Thien, Report on Analyzing stocks of Banking sector EPS Research 21 Report on Analyzing Vietnamese Securities Market Quarter II/2007, Viet Dragon Securities Company, VDSC 22 Report on Overview of Vietnamese listed stock market Quarter IV/2007, Bien Viet Securities company 23 Vietnam, Economy and Securities market in months of early 2007, Bao Viet Securities Company 24 Annual Report 2006, 2007 of Sacombank 25 Announcement Statement 2006 of Sacombank 26 Financial Report Quarter 1/2008 of Sacombank 27 28 Wayne Lonergem , The valuation of business, share and other equity, 1994 Richand A Brealey, Stewant C Myers , Principles of corporate finance, The McGraw Hill Companies, Inc 1996 29 30 31 Jack Clark Francis , Management of Investment , McGraw Hill, Inc 1993 Banking Sector Report, Vinacapital 2006 The article “Can the model CAPM be used in Vietnam?” on the website: http://saga.vn 32 “CAPM and the Characteristic Line” http://www.investopedia com 33 Aswath Damodaran, Valuation A big future, http://www.damodaran.com 34 http://www.sbv.gov.vn 35 http://www.sacombank.com.vn 36 http://www.vndirect.com.vn 37 http://www.vse.org.vn 38 http://www.vnba.org.vn 39 http://www dongasecurities com.vn 40 http://www.cafeF.vn 41 http://www dautuchungkhoan com 42 http:// www.cophieu68.com ... regulations of stock valuation 18 Regulations of valuation methods 19 The regulations of land usage right 23 The regulations of specifying the advantage values The stock valuation... and difficulties in valuing stocks of Vietnamese commercial joint stock banks 60 2.6.1 Advantages in valuing stocks: 60 2.6.2 Difficulties in valuing stocks 61... RECOMMENDATIONS TO ENHANCE/ IMPROVE STOCK VALUATION OF COMMERCIAL BANKS IN VIETNAM 71 Implications for other banks 71 Recommendations to enhance the quality of banking stockvaluation