The Annual general Meeting (AGM) of Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) has approved a historical profit plan. To achieve this goal, the bank will continue to raise service fees. This is a good news for shareholders but a concern for millions of customers.
Pursuing the strategy to increase revenue from services
According to the approved plan, in 2018, Vietcombank targets 13.300 trillion dong of pre-tax profit, up by over 17 percent compared to 2017. For a profitable bank like Vietcombank, growing profit by 17 percent is not a simple task.
The question is where is the room for Vietcombank to expand profit? It can be seen that Vietcombank in the recent years has not aimed to increase credit very strongly, but it has been promoting retail and service segment. In 2018, the bank plans to expand the revenue source by raising the proportion of service revenue in the total operating income.
At the recent AGM meeting, answering shareholders about this issue, Vietcombank’s Chair of the Board of directors (BOD) Nghiem Xuan Thanh said that the bank’s non-interest income in 2017 accounted for 25.6 percent of the total income. In its restructuring scheme, the bank also identified three pillars, including the increase of service fees. “The target is to increase the proportion of non-interest income to 30 percent”, said Thanh.
With this direction, the bank will surely launch more types of service fees in the near future. In March 2018, Vietcombank was the first bank to increase fees and apply numerous types of new fees to card holders.
In fact, raising revenue from service fees is not only the issue of Vietcombank alone. According to report of the National Financial Supervisory Commission (NFSC), the proportion of revenue from services of commercial banks has been increasing. In 2017, the net income from services of commercial banks grew by 34.7 percent compared to the previous year.
In 2018, along with the ambitious profit plans, many banks are also increasing their revenue target from services. Increasing the proportion of revenues from services in the total income is a right way to reduce the dependence on lending. However, the launch of too many types of fees makes consumers to concern. On average, each bank card holder now has to pay 15-20 types of fees.
Nguyen Toan Thang, general Secretary of the Banking Association said that the banks’ fee collection when providing services is in line with the law to partly offset the investment costs.
Despite supporting banks to increase the proportion of revenue from fees as it is the general trend of the world, Dr Nguyen Tri Hieu said that many types of fees charged by banks in Vietnam are currently very unreasonable. Thus, before raising service fees, banks should launch more services to customers, instead of applying too many types of fees.
Many customers believed that the increase of service fees does not go along with quality, convenience and security. Many banks charge high fees but they deny their responsibility if customers encounter loss in their accounts.
Furthermore, according to financial expert Bui Quang Tin, although banks spend a considerable amount of money investing in the ATM system, they also benefit from the low-cost demand deposits (0.2-0.5 percent per annum) that customers leave in their accounts. From that, banks make huge profit from lending out this source of capital at interest rates of at least 5-6 percent per annum. Thus, banks can easily offset the free services offered to customers.
In 2017, Vietcombank recorded nearly 201 trillion dong of demand deposits, accounting for over 28 percent of the total deposits of customers. With this huge cheap capital source, Vietcombank surely has attained trillions of dong from re-lending.
Dr Hieu said that banks should be more equitable with their customers. For customers with dozens or even hundreds of millions of dong in their accounts at non-term interest rates, it is very unreasonable if they are still charged for many fees such as account check fee, account maintenance fee, and statement printing fee, etc.
In addition, in the context when the cashless payment is only at an early stage, if banks take advantage to fully collect revenue from e-banking services, there will be negative impact on the development of this trend.
