Finance & Banking

Last updated: Tuesday, March 19, 2019


Which Vietnamese Bank Has Most Profitable Service?

Posted: Thursday, November 08, 2018

Eight banks reported net profit of over VND1 trillion (US$43 million) in the first nine months of 2018.

Eight banks with over VND1 trillion of service profit
By absolute value, Vietcombank led with a net profit of over VND2,600 billion (US$112 million) in the reviewed period, up 34 per cent year on year. Growth was impressive, but the contribution of service earnings to operating incomes did not improve much, just around 9 per cent.

Spelling out the growth of service income, Vietcombank said that it plans to upgrade its IT systems to support its services, develop some new applications and utilities for customers, improve service quality, and increase transactions to boost revenue growth.

Although the lender did not give further details, the service revenue might still come from cash and payment services (in 2017, Vietcombank posted the biggest revenue in this segment).

Stoxplus said that Vietcombank’s service is expected to further grow, driven by bancassurance since the lender has not focused on insurance revenue although it has the largest customer database. Reportedly, Vietcombank is openly seeking insurance partners with a total deal value of up to US$1 billion.

Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) and Vietnam Technological and Commercial Joint Stock Bank (Techcombank) each earned over VND2,000 billion of service profit in the first nine months. Specifically, BIDV posted VND2,541 billion (over US$100 million), up 19 per cent on year, and Techcombank recorded VND2,113 billion (nearly US$100 million), up 25 per cent. Techcombank gave detailed explanations to service business: In addition to payment and cash services, insurance cooperation and securities underwriting are its main sources of income.

Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank), Military Commercial Joint Stock Bank (MBB), Asia Commercial Bank (ACB) and Vietnam Prosperity Joint Stock Commercial Bank (VPBank) also posted over VND1,000 billion of service profit. MBB saw the highest growth of 63 per cent to VND1,688 billion (US$73.4 million), mainly driven by a surge in insurance service business (VND860 billion of profit from this business, an increase of 3.2 times from a year earlier). Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) has not yet released its financial statements but it will secure a slot in the billion club because the lender bagged nearly VND1,200 billion from services in just six months.

Fast growth but little changed share
Structurally, net income from service activity to total operating income has not generally improved. This rate in small banks is still around 2 - 5 per cent, while in major banks such as BIDV and Vietcombank it is below 10 per cent. Medium and large private lenders such as Sacombank, Techcombank, MBB, ACB, VIB and TPBank have the highest share of over 12 per cent.

Techcombank and Sacombank had the highest share of 16 per cent and 22 per cent, respectively. Both lenders signed insurance deals with big partners in late 2017. Last year, the shares of service at Techcombank and Sacombank were up to 28 per cent and 40 per cent, respectively. Without a new source of income as in last year, insurance service is still a stable source of income for both lenders.

VIB, TPBank and HDBank witnessed biggest changes in service share.

The service share at TPBank grew to 10.9 per cent in the first nine months, from 5.1 per cent a year ago. This sudden growth helped increase its profit although credit growth was already capped in the third quarter as it hit the upper limit set by the State Bank of Vietnam (SBV). The share at HDBank jumped to 5 per cent from 1.9 per cent a year earlier. VIB reported growth of 8.7 per cent to 12.2 per cent in the reviewed period. All these three lenders saw sudden growth from insurance commissions. In addition, their profits from payment services were also impressive. TPBank witnessed a 2.5-fold growth while VIB jumped 74 per cent.

According to financial statements from 20 banks, 16 reported higher service profit in the first nine months of 2018, more than a year ago. The four remaining, namely VPBank, ABBank, BacABank and VietBank, suffered minor declines. VPBank reported a 3 per cent slide to more than VND1,004 billion. ABBank dropped by just VND2 billion to VND128 billion, BacABank by VND3 billion to VND37 billion, and VietBank by 2 billion.

Many banks witnessed shrinkage in many business segments but their service activity still grew steadily. For example, LienVietPostBank incurred a 7 per cent decline in net income in the third quarter, a loss of VND21 billion in forex business, and a loss of VND57 billion from other businesses, but its service stood out with a 76 per cent growth from a year ago to VND42 billion, totalling to VND83 billion in the first nine months, double that of a year ago.

The service business has been relatively stable, unlike other segments like forex and securities trading. Thus, service is still a key choice to increase non-credit income. In the context of the Industrial Revolution 4.0, cashless payment is being strongly accelerated and banks are also rushing to develop and enhance services, especially modern services such as internet banking, digital banking and livebank.


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