In the last week of March, two more commercial banks will hold their Annual general Meetings (AGMs), including Lien Viet Commercial Joint Stock Bank (LienVietPostBank, March 28th) and Military Commercial Joint Stock Bank (MB, March 29th). Most of the remaining members will complete their AGM in April.
Both LienVietPostBank and MB target high profit growth this year. Previously, Vietnam Prosperity Commercial Joint Stock Bank (VPBank) and Vietnam Technological and Commercial Joint Stock Bank (Techcombank) also successfully held their AGThe two both set high profit growth targets along with unprecedentedly high absolute number in the group of joint stock banks, ranging around 10 to nearly trillion dong.
So far, VPBank, Techcombank, MB, Hochiminh city Development Commercial Joint Stock Bank (HDBank), and Asia Commercial Joint Stock Bank (ACB) have basically aimed at over 30 percent profit growth, and even reaching 40$ and over 60 percent.
A big question is raised, which is why the State Bank of Vietnam (SBV) assign credit growth target at just around 15-16 percent, and total asset growth at 20 percent, but numerous members have confidently set the profit growth many times higher than SBV’s.
Each member is associated with specific characteristics and conditions for growth this year. However, there are some common points that insiders have initially shaped for the answer. MB’s general director Luu Trung Thai said that the plan to increase profit by 44 percent this year has been carefully calculated with high reliability and feasibility. Answering the above question, general director of MB explained that MB itself and some other commercial banks have actively moved their assets to higher profitability segment, such as increasing the proportion of retail credit and consumer credit in order to have better Net Interest Margin (NIM). Raising retail credit is also the common choice of many members, confirmed by the operations as well as information of senior leaders at Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), VPBank, and HDBank, etc. In particular, the main difference is to choose unsecured or secured segment.
In addition, from 2016 and 2017, some member banks have completed settling the bonds from the sale of bad debts to Vietnam Asset Management Company (VAMC), such as Vietcombank, Techcombank and MB. Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) has also managed to handle a large amount in 2017. By settling all or a large proportion of bad debts, the risk provisioning burden in 2017 will be less, thereby limiting the influence on profit growth. In this aspect, the more bad debts are handled, the more opportunities will be for reversing provisions for risks and increasing profits.
MB expects high profit growth this year not only depending on the parent bank. The bank’s general director said that most MB’s subsidiaries in the fields of securities, insurance and consumer credit this year will contribute largely to the profit results, after the difficulties or preparations have been basically dealt with in 2017.
For VPBank, FECredit is still the goose that lays golden eggs. Meanwhile, Techcombank, also expects large contribution from its member in securities field; and HDBank expects larger contribution from HD Saison, etc.
On another perspective, for banks such as LienVietPostBank or Maritime Commercial Joint Stock Bank (MaritimeBank), year 2016 and 2017 is the peak time for expanding network with series of new branches and changes of transaction points. This process needs large investment, but is shortening the lag in making profit in order to make better profit contribution this year.
Remarkably, in 2017, many commercial banks have started a golden season for insurance commission. Big value contracts have been signed between Techcombank, Saigon Hanoi Commercial Joint Stock Bank (SHB), Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), and VietinBank, etc. with foreign life insurance companies have made dramatic contribution in terms of service revenue in the past year.
Notably, in addition to the fast uptrend of bancassurance channel, the above contracts all have terms ranging from 10 to 15 years, in which the commission is recorded fairly regularly each year, and will continue to stand out this year.
In the service revenue structure, recent developments have shown that banks are strongly exploiting the “golden mine” via higher service fees. The calculations in this situation show that the expected fee increase will contribute larger to profit, especially for the members having rich individual customer base.
The above structures and movements are creating favourable conditions for banks’ profits in general to surge in 2018. They tend to increase higher profit from services, instead of heavily depending on lending as before without sustainability with bad debts.
