Financial data in the first half (H1) of 2019 of 25 banks gathered by VietnamFinance showed a notable situation: banks tend to depend more on credit.
Specifically, among these 25 banks, up to 16 banks recorded increase in the ratio of net interest income on total operating income in the first two quarters this year.
Banks posting higher ratio of net interest income included Export Import Commercial Joint Stock Bank (Eximbank, up by 18 percent), Vietnam Technological and Commercial Joint Stock Bank (Techcombank, 13 percent), An Binh Commercial Joint Stock Bank (ABBank, 13 percent), National Citizen Commercial Joint Stock Bank (NCB, 12 percent), Kien Long Commercial Joint Stock Bank (Kienlongbank, nine percent), Bac A Commercial Joint Stock Bank (BacABank, nine percent), Saigon Commercial Joint Stock Bank for Industry and Trade (Saigonbank, eight percent), Vietnam Thuong Tin Commercial Joint Stock Bank (Vietbank, seven percent), Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank, six percent), Maritime Commercial Joint Stock Bank (MSB, six percent), HCM City Development Commercial Joint Stock Bank (HDBank, five percent), Nam A Commercial Joint Stock Bank (NamABank, five percent), Saigon Hanoi Commercial Joint Stock Bank (four percent), Asia Commercial Joint Stock Bank (ACB, three percent), Vietnam Prosperity Commercial Joint Stock Bank (VPBank, two percent), and Southeast Asia Commercial Joint Stock Bank (SeABank, one percent).
Meanwhile, some banks saw less dependence on credit, including Petrolimex Group Commercial Joint Stock Bank (PGBank, down by seven percent), Tien Phong Commercial Joint Stock Bank (TPBank, four percent), Viet A Commercial Joint Stock Bank (VietABank, four percent), Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank, three percent), Military Commercial Joint Stock Bank (MB, two percent), Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV, one percent), Commercial Joint Stock Bank for Industry and Trade (one percent), and Viet Capital Commercial Joint Stock Bank (VietCapitalBank, one percent).
Certainly, some banks are significantly affected by extraordinary non-interest income (such as Techcombank recorded sudden increase of nearly 900 billion dong from the sale of TechcomFinance in H1 2018). However, up to 16 out of 25 banks seeing higher ratio of net interest income on total operating income in H1 2019 showed a clear tendency to rely more on credit of banks.
This can be fairly unusual at first, because banks have made great efforts in the recent years to reduce dependence on credit activities by boosting service revenue, especially bancassurance revenue and revenue from payment fees.
In fact, the revenue from services of banks has increased considerably in the last few years and some quarters recorded sharp rise thanks to the one-time fee from bancassurance.
Nevertheless, the banking sector is also experiencing a strong trend of increasing individual customer credit. Since personal credit has a higher profit margin than corporate credit, many banks still achieved fairly high rise in net interest income although they are subject to annual credit growth limit. This partly explain why banks tend to depend more on credit.
This move is tendentious, while the dependence on credit is significantly different in each bank.
Banks with the least dependence on credit (ratio of net interest income on total operating income of less than 80 percent) are mostly major names such as Techcombank, MB, Vietcombank, ACB, BIDV, etc., and some smaller banks such as TPBank, MSB, and VIB (79.7 percent).
The above names are mainly banks that have actively converted their strategies in the direction of diversifying revenue sources in the recent years, such as Techcombank, MB, TPBank, VIB and MSB. Meanwhile, Vietcombank and BIDV continued to attain huge income from services (particularly payment service income) from a huge customer base.
In contrast, banks are most dependent on credit (ratio of net interest income on total operating income from 90 percent and more) are mostly small-scaled banks such as VietABank, NCB, BacABank, NamABank, and Saigonbank.
Although the ratio of net interest income on total operating income reflects banks’ dependence on credit segment, it should be noted that considering this indicator alone is not sufficient, because it does not take into account the income from the bad debts handled by the risk reserve fund. In banks’ financial statements, this income is being accounted into the item “income from other activities”, but in fact, this is income from credit activities.
