At the end of 2015, Vietnam Technological and Commercial Joint-Stock Bank (Techcombank)’s home loan outstanding accounted for only 62 percent of outstanding loan to individual customers and accounted for 25 percent of total outstanding loan. After that, Techcombank began a major transformation in the personal customer segment: abandoning high-risk lending products, especially consumer credit, switching to housing loans for high-income customers.
A recent report of Bao Viet Securities Joint Stock Company (BVSC) said that Techcombank’s loan growth depended heavily on the sales progress for Vingroup Joint Stock Company (Vingroup) projects.
In Q1/2019, Techcombank’s total loan portfolio increased by 3.896 trillion dong (equivalent to an increase of 2.4 percent), in which lending to Wholesale Banking (WB) decreased by over 4 trillion dong (down eight percent), Personal Financial Services (PFS) increased by 6 trillion dong (up eight percent) and Business Banking (BB) increased 2 trillion dong (up eight percent).
According to BVSC, Techcombank’s PFS loan growth in the last quarter came from disbursements of 6.8 trillion dong for home loans for VinCity project (now renamed Vinhomes brand).
In another observation, it could also be seen that Techcombank tended to depend more and more on home loan outstanding.
Specifically, according to data from Techcombank, the structure of PFS loans of this bank was increasingly dependent on home loan outstanding. The proportion of outstanding loans to buy houses on total outstanding loans of PFS at Techcombank continuously increased over the years, from 62 percent (2015) to 65 percent (2016), continued to increase to 72 percent and 76 percent in the 2017 and 2018 respectively. In Q1/2019, the proportion continued to increase to 79 percent.
At the same time, home loan outstanding accounted for a large proportion of total outstanding loans, reflecting a great dependence. According to data from Techcombank, ending Q1/2019, the bank’s home loan outstanding reached 59.8 trillion dong, accounting for about 36 percent of total outstanding loans.
The question is, why does Techcombank depend on home loans in general and Vingroup projects in particular?
Since the end of 2015, Techcombank began a major transformation in the personal customer segment: abandoning high-risk lending products, especially consumer credit, switching to housing loans for high-income customers.
This is one of the reasons why in the past few years, TechcomFinance (a subsidiary of Techcombank) has been rarely mentioned and and finally sold off and brought about 900 billion dong profit to Techcombank.
In fact, in order to develop individual customers, banks mostly have only three trendy options: developing consumer finance with a focus on cash lending, small-scale mortgage lending with a large client file; focusing on lending large consumer needs (mainly for home loans, car purchases) accompanied by selected customer files; or combining both.
With Techcombank, in recent years, this bank has chosen to focus on buying home loans with high-income customer files. This option may have appeared before the conversion, because in 2015, up to 85 percent of Techcombank’s home loan outstanding came from high-income customers. After the conversion, this rate reached 97 percent in 2016, 98 percent in 2017 and began to decrease to 92 percent in 2018 and 90 percent in Q1/2019, due to the start of lending to the lower segment associated with VinCity projects.
In Vietnam, Vingroup can be considered as the dominant high-end housing segment, especially in terms of scale. From the perspective of individual customer development strategy, it is not difficult to understand why Techcombank has cooperated closely with Vingroup and until now it still depends on Vingroup’s projects.
