On June 20, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) organised the Annual general Meeting of Shareholders to approve the business plans in 2020.
Notably, at this meeting, for the first time, Ho Hung Anh, Chair of the Board of directors shared the reason why the bank focused many lending resources on real estate as well as large customers.
Specifically, Ho Hung Anh said that from the beginning, Techcombank had followed the principle of focusing on lending in some areas and segments where the bank could best control risks and achieve the largest market share.
In the field of real estate, he said, the bank had prioritised development since five years ago and this was the area that Techcombank had advantages, which would be a fast-growing field. “Real estate is a banking sector that can focus on risk control and business building. Obviously, the real estate market has developed well in recent years, Techcombank has also built and controlled risks to create value for itself and customers,” Hung Anh said.
Taking practical examples, Hung Anh said that when the Covid-19 pandemic happened, the most affected areas were aviation, textile, tourism, etc. These affected areas had an impact on Techcombank, but not significantly. In fact, from the beginning, the bank’s management has determined that these are areas where risk control must be implemented under a different model so it does not focus on development.
Answering shareholders’ questions about how freezing real estate market impacts Techcombank, Hung Anh said, when developing a business plan, the bank’s leadership had to come up with different scenarios.
However, all safety ratios of Techcombank were now managed by Basel II standards and these bank’s indicators wre very high. “Techcombank’s real estate portfolio is relatively large, but not so high compared to other credit institutions, and meets the safety indicators of the standards. Lending activities in the real estate sector are also clearly defined as investment loans, business loans, and home loans,” Hung Anh emphasized.
For instance, with real estate business loans, the bank had applied a risk ratio of 200-250 percent thereby affecting the capital adequacy ratios. Currently, the capital adequacy ratio (CAR) of Techcombank was up to 16%, the highest in the system.
Answering the question about risks when focusing on a number of large customers such as Vingroup, Sungroup, and Vietnam Airlines. The chair of the bank said that Techcombank’s policy was not to focus on all major customers, but to select.
“It can be seen that Techcombank’s major customers are the most prestigious businesses in the market, creating the most attractive products in the market. Techcombank selects large customers very cautiously and until now has focused on only some of the best customers. Whether this strategy is right or wrong, Techcombank’s profits and safety ratios are now proving. And this is the right direction,” said Hung Anh.
For example, in the field of entertainment and tourism, the bank leader said that Sungroup and Vingroup currently held about 70 percent of the market share in Vietnam. And these were two big customers of Techcombank.
Hung Anh affirmed that Techcombank would not develop another five to ten customers to gain five to ten percent more market share and then have to control risk. He added that Techcombank only focused on customers with collaterals, not unsecured loans. Along with that was the increase in CASA (demand deposit) to increase NIM (the difference between loan interest and cost of fund) and increase income.
“Techcombank thinks that instead of a desk with 10 customers, only the best three customers are needed. Instead of doing business in 10 fields, it only needs two to three fields that you can control the risk,” Hung Anh emphasized.
However, the bank’s leader said he would continue to expand to other areas in the coming years and would see a huge change in the bank’s balance sheet.
In 2020, Techcombank shareholders approved the business plan submitted by the Board of directors with the target of 12 percent increase in total assets, reaching 431.483 trillion dong by the end of the year.
Financial indicators such as credit outstanding until the end of the year will be at 291.586 trillion dong (up 13 percent or higher than the level allowed by the State Bank of Vietnam SBV), control bad debt below three percent. The capital mobilisation target is expected to reach 268.82 trillion dong (up 13%). The bank expects to earn a profit before tax of 13 trillion dong this year, up one percent compared to the previous year’s revenue.
