Among the indicators that evaluate banks’ business performance, the rate of return seems to be the most important indicator, in which the Return on Average Equity (ROEA) and Return on Average Assets (ROAA) are the two key measures.
ROEA reflects how much after-tax profit is generated by each dong of the average equity. Meanwhile ROAA reflects how much after-tax profit is generated by each dong of the average assets.
In the first half of 2019 (H1), Vietnam International Commercial Joint Stock Bank (VIB) recorded the highest ROEA with 13.1 percent, followed by Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) with 13 percent and Asia Commercial Joint Stock Bank with 12.9 percent.
Banks recorded ROEA of more than 10 percent can be named as Tien Phong Commercial Joint Stock Bank (TPBank) with 11.8 percent, Military Commercial Joint Stock Bank (MB) with 11.3 percent and HCM City Development Commercial Joint Stock Bank (HDBank) with 10.8 percent.
Among the above banks, VIB and TPBank have been emerging in recent years. They also have the highest proportion of medium and long-term loans in the system, which partly explain their strong profit increase because medium and long-term lending rates are usually significantly higher than short-term rates because they bear more risks.
Another common point of the two banks is that they both focus on developing personal loans with higher profit margin than corporate loans. In 2018, TPBank’s outstanding loans to individual customers reached up to 51 percent, while that was 40 percent in VIB. For VIB, the driver of personal loan acceleration mainly comes from home loans and auto loans.
In addition, revenue from services with the push from payment fees and bancassurance of the two banks has also grown very fast in recent years.
Returning to the group of banks with the highest ROEA in the system, in addition to familiar names like Vietcombank, ACB and MB, HDBank is a notable name. Statistics showed that in the last three years, the average after-tax profit increase of HDBank is up to 74 percent per annum one of the highest level in the banking system.
Along with HD Saison which operates in consumer finance field, the sharing of ecosystems with Vietjet aviation and real estate giant Sovico Holdings is also a difference which helps boost HDBank’s profit.
Followed the group of banks with ROEA of above 10 percent are Vietnam Prosperity Commercial Joint Stock Bank (VPBank, 9.5 percent) and Vietnam Technological and Commercial Joint Stock Bank (Techcombank, 8.4 percent). While VPBank has an advantage in consumer finance with the “goose that lays golden eggs” FE Credit, Techcombank is prominent with the strategy of revenue diversification, from lending, underwriting, corporate bond brokerage and bancassurance to payment development.
In addition, among the current banks, VPBank and Techcombank can be considered the two most active banks in the digital bank development the foundation of bank profits in the medium term. Their ROEA ranks are expected to improve significantly in the future, even reaching the top.
Two big banks including Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) and Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) ranked in the middle group with ROEA of respectively 6.8 percent and 6.2 percent. Their return is being strongly affected by the increase in risk provisioning to handle outstanding bad debts. According to statistics, the total provisions for risks in H1 2019 of BIDV and VietinBank were lager than 24 banks combined.
Some small and medium-sized banks recording high ROEA in H1 2019 can be named as Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank, 8.1 percent), Nam A Commercial Joint Stock Bank (NamABank, 7.9 percent) and An Binh Commercial Joint Stock Bank (ABBank, 7.4 percent).
Meanwhile, being in the last group of banks in terms of ROEA are mostly small banks like Saigon Commercial Joint Stock Bank for Industry and Trade (Saigonbank, two percent), Petrolimex Group Commercial Joint Stock Bank (PGBank, two percent), Viet A Commercial Joint Stock Bank (VietABank, 1.7 percent), Viet Capital Commercial Joint Stock Bank (VietCapitalBank, 1.1 percent) and National Citizen Commercial Joint Stock Bank (NCB, 0.4 percent).
For Saigon Commercial Joint Stock Bank (SCB), its after-tax profit in H1 was very low compared to its scale (ROEA in H1 reached only one percent), because it was merged from three weak banks in the past, thus the amount of bad assets, unprofitable/ less profitable assets is still very large.
Regarding ROAA, in H1 2019, Techcombank took the lead with 1.33 percent, far exceeding the remaining banks, followed by VPBank (1.03 percent), MB (1.03 percent), VIB (0.96 percent), TPBank (0.92 percent), ACB (0.85 percent), HDBank (0.83 percent) and Vietcombank (0.83 percent).
In summary, it can be seen that the Top 10 banks with the highest ROEA and ROAA in the system shared nine common names, including Vietcombank, Techcombank, MB, VPBank, ACB, HDBank, VIB, TPBank and LienVietPostBank.
Considering the Top 5, three banks were in the both groups with the highest ROEA and ROAA, including MB, VIB and TPBank.
