If in the previous quarters, the contribution of bancassurance business and services was still limited, it has now become the main source of income in many banks’ service activities.
Military Commercial Joint Stock Bank (MBBank) has announced the consolidated financial statement in the second quarter (Q2) 2019 with pre-tax profit in the first half of the year (H1) reaching 4.875 trillion dong, up by 27.3 percent compared to the same period of 2018. With this result, MBBank has completed nearly 51 percent of its annual plan. Credit continues to be the bank’s core business as it brought about 8.529 trillion dong of net interest income, up by 25.5 percent compared to the same period of 2018.
In addition to credit segment, service segment of MBBank also recorded an increase of 86 percent over the same period of last year, reaching 1.813 trillion dong, mainly thanks to the strong rise in insurance business and services which contributed about 60 percent of the total profit from service activities. MBBank’s sharp service revenue increase in 2018 was also thanks to the growth of service services. The gross profit from this business at MBBank increased from 38 billion dong (in Q1 2018) to 462 billion dong (Q1 2019), equivalent to 12 times.
At Tien Phong Commercial Joint Stock Bank (TPBank), the revenue from insurance business and services in Q1 2018 only contributed 17 percent to the total service revenue, but this ratio increased to 31 percent in Q1 2019. Insurance became the strongest growth service segment of TPBank in Q1 2019 when it increased five times over the same period (from 17 billion dong to 86 billion dong) and the high growth momentum continued to be maintained in Q2 2019.
Accordingly, in H1 2019, the income from insurance business and services reached more than 249.4 billion dong, twice as much as the same period of 2018, accounting for 41 percent of the service income structure. The profit TPBank attained in the first two quarters of 2019 reached 1.620 trillion dong, up by 596 billion dong, equivalent to an increase of 1.5 times over the same period of 2018, completing 50.6 percent of the profit plan set for the whole year.
According to finding of Dau tu Chung khoan newspaper, many customers said that they have recently received invitations to buy life insurance when conducting banking transactions. Employees at many banks also shared that the sales of insurance are being promoted and targets are assigned to each employee similar to the targets for capital mobilisation, lending, card issuance, etc.
In H1 2019, the pre-tax and after-tax profit at Vietnam International Commercial Joint Stock Bank (VIB) reached respectively 1.820 trillion and 1.456 trillion dong, both up by about 58 percent over the same period of 2018, in which the bancassurance and card issuance took the lead in revenue. The growth of service segment in H1 of VIB also came from insurance commission revenue. Thanks to that, the bank’s profit from service segment significantly increased by 142 percent to 764 billion dong. The profit from other activities increased by 11 percent to 93.5 billion dong.
In addition to lending, VIB has also focused on promoting research and development of card lines, so its revenue in card issuance and card spending doubled the sector’s average. In addition, VIB is also one of the top banks in terms of life insurance sales. VIB is currently a major partner which distributes more than 75 percent of Prudential’s bancassurance sales in Vietnam.
For Asia Commercial Joint Stock Bank (ACB), the bank estimates to have collected about 350 billion dong from bancassurance in H1 2019, 2.5 times higher than the same period of 2018, ranking fourth in revenue and second in profitability of bancassurance services on the whole market. In 2019, bancassurance segment is expected to bring about 600 billion dong to ACB. At the same time, ACB also plans to earn three times more revenue this year and is considering further cooperation with partners in 2020.
In fact, the revenue from service activities, particularly bancassurance is on the rise and considered as the “goose that lays golden eggs” of many banks in the near future. According to forecast of Saigon Securities Incorporation (SSI) Research, the insurance premium through bancassurance will grow by about 30-40 percent and become the preferred sales channel with the proportion increasing to 14 percent in 2019.
Increasing profit from service fees in general and bancassurance in particular, according to analysts, is the right strategy of banks in the context when credit activities are increasingly tightened. However, it takes time for consumers to get used to insurance, instead of repeatedly approaching customers as at the present time, which may cause “reverse effect”.
