2018 marked the ten-year anniversary of LienViet Post Joint Stock Commercial Bank (LienViet Post Bank). Though it is a young bank, it has gained advantages in early stage and is gradually specifying the value of those advantages.
Going back to go forward
In 2018, LienViet Post Bank adjusted its profit target for the first time. This is a proactive step back from the original target.
On the one hand, different from the previous period, this is the first year that the State Bank of Vietnam (SBV) has implemented a mechanism to allocate low credit growth targets without further adjustments to most commercial banks. LienViet Post Bank’s target is also limited compared to the previous plan. On the other hand, LienViet Post Bank in 2018 actively created a strong shift to retail banking strategy. Taking the opportunity to invest in expanding the network along with human resource development requires large initial operating costs and partly directly affects its profits.
Pham Doan Son, vice President and general director of LienViet Post Bank, explained about the above ‘backward step’, saying: ‘The reason for the cautious targets set by LienViet Post Bank in 2018 is to expand the system towards retail banking, which will increase the investment costs of the network and personnel’.
It utilises the banks’ typical advantagea joint stock bank with the largest network in Vietnam, with nearly 400 branches and transaction offices, more than 1,000 postal transaction offices, and the right to exploit more than 10,000 commune cultural post offices.
This advantage has not been effective so far. In the period of 2011-2012, when the system of Vietnamese commercial banks in general faced difficulties in liquidity, the network of Postal Savings after the bank’s merger created great resources for LienViet Post Bank not to only ensure liquidity but also ease the shortage of supply on the interbank market.
The Postal Savings system at that time had a wide network, advantageous to mobilising small amount of money in the population throughout the country. Up to now, at a higher level, LienViet Post Bank has focused on investing to upgrade the system into a system of banking transaction offices.
The above advantage is associated with the traditional operation of this commercial bank. At the same time, a new advantage of LienViet Post Bank has also been established, leading in technology and the trend of online payment: Vi Viet non-physical card.
Promising breakthroughs in 2019
Taking the opportunity to invest in the network with its specific advantages, LienViet Post Bank created a strong shift to retail banking and the cost initially increased.
Retail mobilisation and residential deposits often have higher interest rateshigher coststhan the previous interest structure of LienViet Post Bank. In return, the bank will be able to create a stronger attraction in terms of quantity and reinforce the sustainability of the deposit structure instead of organisational and businesses deposits with a higher level of laxity.
In the past, the proportion of population deposits at this bank was only 40-50%. In 2018, with the above trend of retail mobilisation movement, this proportion has been raised to 60%.
Along with that, retail credit also adheres to the advantages of network development, closer to the small and medium-sized enterprises and individual consumption. The previous loans were large, more focused, but more risky, accounting for over 60 percent of total outstanding loans. However, so far, they have shifted to retail credit with the proportion to 50 percent by the end of 2018.
Retail credit is a trend in Vietnam, both having higher profit margins and dispersing risks to many subjects and many industries. Especially, in Vietnam, LienViet Post Bank is also one of the first commercial banks to develop retail credit in close cooperation with social organisations such as Women’s Union and Veterans Association to increase safety and credit quality.
Especially, LienViet Post Bank is also the first commercial bank to deploy retail credit via e-wallet.
Only over more than three years of piloting and officially launching, Vi Viet has established impressive numbers and results. As of March 31, 2019, it had 2.5 million users and nearly 28,000 points of payment acceptance and reached more than 15.2 million transactions with a total transaction amount of 70.3 trillion dong. The total amount of money transfer transactions reached 26 trillion dong, the total amount of bill payment reached 1.3 trillion dong. According to the above retail strategy, Vi Viet has so far attracted more than 5.4 trillion dong of online savings and the total amount of mortgages (total disbursements) reached 1.4 trillion dong.
With strategic adjustments, especially after focusing on building foundation in 2018, LienViet Post Bank is gradually achieving such concrete results.
From 2019, with the new targets submitted to the general Meeting of Shareholders on April 24, LienViet Post Bank’s activities are likely to have breakthroughs. Accordingly, it is expected that its total assets would reach 190 trillion dong, capital mobilisation from the market 165 trillion dong, credit outstanding balance in the market 140 trillion dong, and especially profit before tax would increase by 57 percent to 1.9 trillion dong.
