Beside credit income, banks continue to promote services, in which insurance fee contributes positively to total banks’ revenue.
According to Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) leaders, the bank’s premium revenue increased by more than 35 percent in 2019. In the total profit before tax of 12.8 trillion dong, non-interest income increased by 23.4 percent over the same period last year to 6.8 trillion dong. Techcombank’s goal this year is to boost fee revenue from this segment. At a meeting with investors in HCM City at the end of February 2020, Techcombank’s general director, Nguyen Le Quoc Anh, said that last year, the bank had a strong transformation in this service segment.
Instead of consulting with an insurance company, Techcombank trains nearly 4,000 employees to provide the best advices to customers in buying insurance. Among all banking services, Ministry of Finance only requires certification to insurance products.
“This is very important so Techcombank must have a careful preparation of its human resources to promote premium revenue. Since then, the bank has gradually changed digitising processes and products, in order to best meet the insurance needs of customers. This is the preparation process of Techcombank in 2019 to create results in 2020,” Anh said.
According to the general director of Techcombank, the introduction of a bank or insurance product by a bank employee is different from the one that introduces a customer to an employee of an insurance company. Therefore, in 2019, Techcombank has made changes to ensure that bank employees must sell properly insurance products to meet the needs of customers. Therefore, instead of only receiving insurance brokerage fees, the bank will now sell insurance products to its customers.
According to Rong Viet Securities Company (VDSC), Techcombank has built a diversified service income structure with fairly equal contribution from payment, insurance and bond services. In particular, bancassurance fee is almost the only growth driver of service income in 2019 with an increase of 29 percent over the same period and contributed 28.6%.
Similarly, Ban Viet Securities Company (VCSC) stated that bancassurance would boost the non-interest income of Asia Commercial Joint Stock Bank (ACB) this year. VCSC expected ACB would continue focusing on retail growth and Small and Medium Sized Enterprises (SME) loan growth at a compound rate (CAGR) during 20192022 to reach 15.5%. According to VCSC, ACB’s NIM will fluctuate around 3.57 percent in the period of 2020-2022. The Bancassurrance will replace the income from settled debt recovery as the main driving factor for non-interest profit of ACB.
Bad debts that have been settled off-balance sheet related to Vietnam Assets Management Company (VAMC) and the group of six companies are currently on the right track to fully recover in 2020. In the context of ACB not actively clearing off-balance sheet debts, VCSC said that the balance was small. The problematic assets would remain in the off-balance sheet assets of ACB in the coming years. Therefore, income from off-balance sheet bad debt collection was forecasted to contribute insignificantly to non-interest profit from 2021, while bancasurrance would start to accelerate in 2020.
Financial analysts also said that ACB, like Vietcombank, was one of the best retail franchise businesses. Accordingly, ACB may have an attractive position to ensure an exclusive bancassurance agreement with favourable terms for the bank. The focus of ACB in 2020 is market share enlargement and exclusive bancassurance cooperation.
Do Minh Toan, general director of ACB also said that the bank aimed to continue expanding its customer base in order to consolidate fee income, enhance competitive advantage for the upcoming exclusive bancassurance cooperation and digital banking development in the future.
According to Bao Viet Securities Company (BVSC), although ACB may increase 324,000 customers to 2.8 million customers in 2019, its customer base is still behind Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank), Military Commercial Joint Stock Bank (MBMBBank), and Techcombank with six million, four million and four million individual customers.
TPBank is also taking advantage of retail and SME customer base, cross-selling high-fee products. VCSC has just released an updated report on TPBank with the opinion that credit card and bancasurrance will be the main driving factors for the bank’s growth in fee income with a 46.4 percent CAGR for the period 2019-2022.
