Selling insurance products through banks (bancassurance) is one of the bright spots in service activities of banks last year with big contribution to banks’ profits. This year, although it is forecasted to be more difficult, banks still have high expectations for this segment.
At Tien Phong Commercial Joint Stock Bank (TPBank), the net profit from insurance business in 2019 was more than 570 billion dong, accounting for more than 50 percent of the total net profit from service segment, up by 55 percent compared to 2018. Although the number is not too big, it is a remarkable results considering the system size of TPBank with only 75 branches and transaction offices nationwide.
For Military Commercial Joint Stock Bank (MB), by the end of 2019, the bank recorded a record high pre-tax profit of more than 10 trillion dong, up by 29 percent over 2018, exceeding the set plan. In particular, the net profit from service activities increased by 24 percent with 3.186 trillion dong, contributing 13 percent to the total operating income. Notably, insurance business alone contributed 1.788 trillion dong to MB’s net profit, accounting for 56 percent of the service income, up by 18 percent compared to 2018, and nearly five times higher than 2017.
Thus, in the past two years, the profit from bancassurance of MB recorded a gross growth of more than 120%, nearly doubled the profit growth rate of the whole service segment. In addition to the cross-selling corporation with insurance companies, the establishment of MB Ageas Life Insurance Company Limited in 2017 contributed significantly to this achievement. MB said that 85 90 percent of the new revenue of MB Ageas Life came from direct distribution through the bank’s transaction system.
According to Vietnam Technological and Commercial Joint Stock Bank (Techcombank), the demand for insurance products of customers is gradually increasing. The insurance premium revenue of the bank rose by more than 35 percent in 2019, contributing to the pre-tax profit result of 12.8 trillion dong and revenue of 21.1 trillion dong, up by respectively 31.5 percent and 24.7 percent compared to 2018. The bank’s net interest income was 14.3 trillion dong, up by 25.2%; and non-interest income was 6.8 trillion dong, up by 23.4 percent and accounting for 32.3 percent of the total revenue. Viet Dragon Securities Company (VDSC) said that Techcombank has built a diversified service income structure with fee collection from payment, insurance and bond services. In particular, bancassurance fee is almost the only growth driver of the bank’s service income in 2019, with positive contribution in total profit.
Vietnam Prosperity Commercial Joint Stock Bank (VPBank) also recorded significant profit from insurance service. The bank’s net profit from service activities grew by 84 percent last year, in which the net profit from bancassurance accounted for 42 percent with nearly 1.250 trillion dong, up by 42 percent compared to the previous year. VPBank’s bancassurance income growth was mainly thanks to the distribution of life insurance to priority customer segments under an exclusive cooperation agreement with AIA Vietnam. According to calculation of VNDirect Securities Company, the commission from the sale of insurance via banking channel will contribute an additional 1.445 trillion dong to VPBank’s non-interest income in the period of 2018 2020.
For Vietnam International Commercial Joint Stock Bank (VIB), bancassurance is also the main growth driver of service segment in recent years. After signing an exclusive life insurance distribution agreement with Prudential in late 2015, VIB’s bancassurance income has recorded high growth in the last four years, currently accounting for nearly 80 percent of the bancassurance market share of this insurance company.
According to VDSC’s statistics, the number of life insurance contracts of VIB in 2018 increased by more than 200 percent compared to 2017 and more than 260 percent compared to 2016. In 2019, VIB’s insurance commission fee reached nearly 1.112 trillion dong, 4.6 times higher than 2018, contributing 50 percent to the total revenue. At the same time, the net profit from this activity accounted for 62 percent of the total net service income.
According to Saigon Securities Incorporation (SSI) Research, the insurance premium via bancassurance channel of Techcombank grew by about 30 40 percent in 2019 and contributed 14 percent to the bank’s revenue. Techcombank’s goal in 2020 is still to promote the fee revenue from this segment.
At the meeting with investors in HCM City earlier this year, Techcombank’s general director Nguyen Le Quoc Anh said that the bank saw a strong transformation in bancassurance segment last year. Instead of using consultancy of insurance companies, the bank has trained nearly 4,000 employees to both provide the best advices to customers in buying insurance and ensure the certificate requirement of the Ministry of Finance.
“This is a preparation process of Techcombank in 2019 to achieve better results in 2020 as well as in the coming period, so it is necessary to be cautious about human resources. Since then, the bank has gradually digitised the processes and products to best meet the insurance needs of customers,” said Quoc Anh.
Regarding Asia Commercial Joint Stock Bank (ACB), Viet Capital Securities Company (VCSC) said that bancassurance will promote the bank’s non-interest income this year. The bank will continue to focus on boosting credit to retail and small and medium-sized enterprises with Compound Annual Growth Rate (CAGR) of 15.5 percent per annum in the period of 2019 2022; Net Interest Margin (NIM) of about 3.57 percent per annum in this period. In particular, bancassurance will replace the income from the recovery of debts and become the main driving factor for ACB’s non-interest income.
According to financial analysts, ACB is one of the best retail franchise businesses at the present time. ACB has an attractive position to guarantee an exclusive bancassurance agreement with favourable terms for the bank. ACB’s focus in 2020 is increasing market share and exclusive bancassurance cooperation. general director of ACB Do Minh Toan said that the bank targets to continue expanding customer base to consolidate fee income, enhance competitive advantage for upcoming exclusive bancassurance cooperation deals and the development of digital banking in the future.
VDSC stated that Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) and ACB are the two banks with significant growth in annual insurance income thanks to their new bancassurance agreements. In 2019, Vietcombank signed an exclusive agreement with life insurance company FWD Vietnam in November 2019 for a period of 15 years, while ACB signed a non-exclusive agreement with Manulife in September 2019 and FWD in December 2019.
Vietcombank and FWD Vietnam have officially launched the distribution of bancassurance products since mid-April 2020. Thomas William Tobin, director of Vietcombank Retail said that FWD Vietnam has a prominent advantage in applying digital technology to all processes of insurance activities; a diversified, simple and suitable to each customer segment, compatible with Vietcombank’s digital banking transformation strategy and retail banking development strategy.
The exclusive agreements with insurance companies will help banks generate significant income for the next few years. Therefore, many banks are looking for exclusive life insurance partners with the expectation of raising revenue from services. However, in the difficult situation caused by the Covid-19 pandemic, many people said that not all banks could achieve the high growth targets set for bancassurance segment.
VDSC said that recovering high growth from bancassurance activities of MB will be fairly difficult because insurance products are often cross-sold with loans, while the credit growth in 2020 is likely to fall compared to 2019, in addition to the increasingly fierce competition pressure. According to VDSC, MB’s service income growth in 2019 slowed down quarterly and only reached 24.3 percent by the end of the year, significantly lower than the initial goal of 50%, in which the net income from insurance only increased by 33.9 percent (368 percent in 2018, reaching 1.788 trillion dong, equivalent to 56.1 percent of service income).
In addition, in the structure of service income, other service fees of MB are limited, such as income from payment treasury accounts for a low proportion (24.1%) and grows at a moderate rate (17%). VDSC estimated that MB’s growth of income from payment and insurance will decrease to respectively 15 percent and 30 percent in 2020.
