Close to the end of the year, banks were sprinting to the finish line. According to the semi-annual result of Vietnamese banks, there was a deep differentiation. The leading performance continued to be improved in banks focusing on quality.
Where did strong growth come from?
In 2019, the credit tightening policy was still set by the State Bank of Vietnam (SBV) as a goal besides strengthening asset quality management and bad debt handling. The question being highly concerned was where banks’ outstanding growth comes from?
In the list of Top on profits of the banking industry, two names continued to be called: Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and Vietnam Technological and Commercial Joint-Stock Bank (Techcombank). At Vietcombank, profit continued to rise thanks to strong growth in the customer loan portfolio, disbursement focused on individual lending segment and proportion of long-term loans increased.
Meanwhile, after the first six months, Techcombank recorded a profit of nearly 5.7 trillion dong, rising 32 percent, revenue reached 9.1 trillion dong, increasing 19 percent over the same period last year. Noticeably, in which net interest income reached nearly 6.5 trillion dong, increasing 28 percent; fee income increased by 19 percent over the same period. In turn, Techcombank had 15 quarters of growth in both revenue and profit in a row.
Techcombank focused on technology investment to serve a large number of customers, and transactions were growing very fast, Nguyen Le Quoc Anh, Chief Executive Officer (CEO) of Techcombank, recently discussed with analysts.
Focusing on digital conversion yielded unexpected results. For example, nearly 1 quadrillion dong was transacted through Techcombank’s online channel in the first six months of 2019, tripling the same period in 2018. Instead of taking a week to make a credit card, now existing customers using Techcombank’s products can open online credit cards, and it only took less than 15 minutes to complete all these procedures.
Similar to individual online deposit products, in the first six months of the year, the number of online contracts doubled over the same period. At the beginning of 2018, the proportion of total term deposits on the bank’s online channel accounted for about 12 percent of the total deposits. This figure (Q2/2019) currently reached nearly 30 percent.
Techcombank aimed to bring this personal online deposit product at the end of the year to reach 40 percent of total deposits. Thus, spending less than three minutes to operate, customers using savings products on Techcombank’s online channel can also enjoy higher interest rates.
The bank had freely traded nearly 1 quadrillion dong transferred via Techcombank’s online channel. That was the way Techcombank had chosen to help people change their money usage habits. Since the operation of E-Banking 0 dong on September 2016 to the end of Q1/2019, Techcombank waived about 600 billion dong of fee for electronic fund transfer customers, as reported by Quoc Anh.
Effective channel of capital
The data gathered from leading banks demonstrated that differences in debt quality and business models would continue to create a divergence in profitability among banks. Banks that cleared VAMC debt, good debt quality, and were active in the retail segment would increase profits faster than banks struggling to handle debt.
Potential banking activities in 2019 concentrated in retail banking and transactional banking. Especially in the first half of this year, there was a rise in investment banking. Currently, the loans of businesses came mainly from the credit of the banking system. However, with the credit tightening policy, corporate bond issuance became an active capital channel.
At Techcombank, investment banking led the market many years ago. In 2018, Techcombank advised businesses to issue 62 trillion dong of bonds, increased 46 percent compared to 2016. These bonds were then distributed to institutional and individual customers, with a volume of bonds distributed at 24.4 trillion dong, calculated on the first half of 2019.
Techcombank’s customer-centric strategy focused on six key economic sectors, accounting for 48 percent of Vietnam’s Gross Domestic Products (GDP) and had a growth rate of 16 percent, more doubled the GDP growth rate. More importantly, it satisfied most of the needs of Vietnamese people, from long-term needs such as buying houses and cars to everyday needs such as payment of consumption, food, transportation, retail, and so on.
Customers had many needs, in which credit was only a part, and Techcombank wanted to provide a comprehensive solution for those needs. They connected economic sectors, promoted the development of value chains from end-consumers to manufacturers and distributors. They managed cash flow and risks at all stages of the value chain, bringing the highest value to customers. Profits, therefore, would come, according to CEO of Techcombank.
The end of 2019 would be a fierce race among banks. The potential of the market was still tremendous, but the growth rate was considered by experts to be uneven but continue to be sharply segmented due to strategies and implementation solutions. In which advantages would be in favour of banks having solid steps focusing on human resources and technology.
