Although the damage caused by Covid-19 has begun to manifest, some banks were expected to make up for this year’s profit.
The Covid-19 pandemic spread had a great impact on all economic sectors. Particularly for the banking sector, the adverse effects of the epidemic had begun to be quantified, by the fact that many members had to cut costs and adjust profit plans this year.
According to analysts, starting from Q2/2020, bank profits could begin to be affected as interest income, fees and bad debt collection of the banking sector would decrease when meeting the customer needs through the provision of preferential loan interest rates, cutting transaction and payment costs.
However, some banks were expected to have large revenues to make up for this difficult general year.
Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) had just announced a collaboration with FWD Vietnam Insurance Company to officially carry out the exclusive cooperation agreement to distribute insurance via banks. In the first phase of implementation, Vietcombank would distribute FWD insurance products at more than 550 branches and transaction offices of Vietcombank nationwide.
Earlier, at the end of 2019, FWD and Vietcombank signed an agreement to pay about $400 million for Vietcombank to distribute long-term insurance to the bank.
However, according to BizLIVE’s research, the value of $400 million mentioned above was only the initial sum as an ‘entrance ticket’. The real value of this deal was many times larger, which included annual sales. The volume of the contract was valid for 15 years.
In 2019, Vietcombank had not yet accounted the revenues of the deal above into profits. From 2020, this was expected to be a great balance for the member having been the number one profit of the Vietnamese banking system for many years.
Accordingly, this was referred to as saving or extraordinary income that started to be accounted. And remarkably, this source of revenue was completely separated from credit.
According to the recently released financial statements, Vietcombank currently held 45 percent equity in the Vietcombank-Cardif Life Insurance Company (VCLI), the remaining 55 percent was owned by BNP Paribas Cardif. The original cost of Vietcombank’s investment in this insurance company was 270 billion dong. The book value was 276 billion dong.
Accordingly, regardless of the accounting method, this deal would bring Vietcombank a significant surplus from 2020 and insurance commission revenue in the following years.
Meanwhile, Saigon Hanoi Commercial Joint Stock Bank (SHB) was expected to earn a large amount this year when it had just announced to divest from Saigon Hanoi Bank Limited Financial Company (SHBFC) for major foreign strategic partners.
Reportedly, SHBFC had a chartered capital of 1 trillion dong, which was 100 percent owned by SHB. Before the merger, SHBFC was formerly Vinaconex Vietel Finance Company.
Due to the regulation on financial companies of the government and the State Bank of Vietnam (SBV), this company chose SHB to be the main partner in the merger.
In 2019, total assets of SHBFC reached nearly 3.3 trillion dong, an increase of 2.75 times compared to 2018. In which, balance reached 2.7 trillion dong, 3.8 times higher than in 2018. Profit reached nearly 107 billion dong.
SHB had not disclosed the transfer value yet as well as the identity of the transferee, however, said it would gain a large surplus from this deal.
Unlike Vietcombank and SHB, Vietnam Prosperity Joint-Stock Commercial Bank (VPBank)’s ‘savings’ were in the ‘golden egg’ of FE Credit. Since the beginning of 2020, VPBank had taken steps to prepare for the initial public offering (IPO) of this consumer finance company.
Currently, FE Credit had completed the conversion from a one-member limited liability company into a joint-stock company. Besides, FE Credit’s chartered capital size was also increased to 7.333 trillion dong.
For many years, FE Credit’s profit had contributed more than half of VPBank’s business results. And expected this year, if the IPO were successful, the surplus that this company brought back would be not small.
As above, the anticipated revenues at some commercial banks had great value potential. Normally, when specifying the ‘saving’ part, the bank would record an extraordinary income.
However, as sharing at a previous investor conference, after selling a financial company and accounting for interest, the leader of a commercial bank insisted that there was nothing called abnormal. Every result, every increase in income and profit of a commercial bank, or any business, always came from the previous calculation, preparation and construction, not an unusual self.
