After the negative growth in the third quarter (Q3) of 2018, the profit of Vietnam Prosperity Commercial Joint Stock Bank (VPBank) increased again and for the first time exceeded three trillion dong in a quarter.
The bank’s Q3 pre-tax profit in 2018 reached nearly 1.750 trillion dong, down by 26 percent over the same period of 2017, marking the first quarter of negative growth after two consecutive years of growth.
However, VPBank regained the growth in Q4 and posted record high profit of 3.073 trillion dong, up by 23.4 percent over the same period of 2017. Thanks to this result, the bank’s profit in 2018 reached nearly 9.2 trillion dong, up by 13 percent compared to 2017.
Luu Thi Thao, deputy general director of VPBank said that both the parent bank and FE Credit improved operation in Q4 after a period facing many challenges from the limit in credit growth and system consolidation.
Specifically, the revenue from services of the entire bank in 2018 was 1.612 trillion dong, with about 60-70 percent from insurance premium revenue. The service revenue source, despite not accounting for the largest proportion, played the role of a growth driver with a growth of 43 percent in Q4 and 10.3 percent in the whole year. For the parent bank alone, this revenue reached up to 67 percent over 2017.
VPBank’s income from credit cards also rose sharply. According to the bank’s leader, after six years of developing this business, VPBank is having the fastest growth in credit card issuance. The bank is currently taking the lead in market share for MasterCard trading revenue, in addition to the indicator about card issuance. On average, each credit cardholder spent 11.5 million dong per month, up by 79 percent compared to the previous year.
VPBank also had another source of revenue that grew strongly in 2018, particularly in Q4 revenue from other activities. The bank’s financial statement showed that approximately 3.193 trillion dong of provisioned bad debts have been reversed, nearly threefold higher than the number in 2017.
Explaining more about the bad debt recovery activities, Thao said that the ratio of provisions on bad debts (reflecting the bank’s resistance) continued to increase and is currently 77 percent. VPBank actively provisioned for the unsecured loans with risky signs and classified in group 5 in order to balance the risks.
In its current lending portfolio, VPBank is still keeping the proportion of secured loans on unsecured loans at a stable level of about 35 percent of unsecured loans (including FE Credit and the parent bank).
Regarding expenses, the bank’s leader shared a surprising data that the bank’s Costs to Income ratio (CIR) of FE Credit was lowered to 28 percent.
According to Kalidas Ghose, general director of FE Credit, the company grew significantly in Q4, attaining operating income of 14 trillion dong in 2018, nearly 11 times higher than Q1, Q2 and Q3.
FE Credit’s leader said that in Q4, FE Credit shifted from one-time use product to reusable product. FE Credit’s credit card product currently has the highest market share among consumer finance companies. It is expected to help restructure the company’s portfolio.
Is it a return of VPBank or just a temporary jump?
After a break to strengthen the system, refining products, services and models in strategic customer segments in Q3, VPBank’s deputy general director said that the bank’s management board aims to balance two objectives in 2019, including high but selective growth of 15-17 percent (higher than the group with strong growth) and growth in productivity.
The basis for this growth objectives is supported by VPBank’s strong capital source. According to Thao, the ratio of short-term funds used for medium and long-term lending of VPBank has been lowered to 33 percent, much lower than the 40 percent required from the beginning of 2019, because the bank has been well prepared and spent a lot on mobilising more medium and long-term capital.
The highlight in VPBank’s business report, as repeated by the bank’s general director Nguyen Duc Vinh, is the total operating income of approximately 31 trillion dong, the highest among commercial banks and doubled the joint stock bank right behind it.
In addition to the story about growth, a positive trend was seen in VPBank’s income structure when the non-credit revenue continued to increase its proportion at VPBank. From 90 percent10 percent in 2016, revenue from interests of VPBank currently accounts for 80 percent, while the remaining 20 percent comes from non-interest revenue.
What VPBank managed to do in Q4 as well as in the whole year was to increase service activities to optimise its revenue source. Vinh said that, at the parent bank, one third of the 25,000 credit cards issued monthly and more than 60 percent of the new deposit rates are carried out via online channel. The bank’s promotion of digital banking helps the bank to lower the number of transactions over the counter to just seven percent.
Concerning expenses, the bank will conduct review to improve its organisational structure, cut unnecessary units to maintain a more sophisticated apparatus and realise investments in digital technology and automation in order to lower CIR.
According to general director Vinh, the basic foundation from revenue structure, ability to reduce costs and increase efficiency from investment in technology (digital) are the factors that allow the bank to make a leap in business performance in the next few years.
