The strategy of reducing wholesale and increasing retail is a very typical strategy which has been carried out by commercial banks, especially state-owned ones, over the last many recent years,
The shift of models from focusing on large customers (wholesale) to small ones (retail) allows banks to reduce the risk of dependence, increasing the sustainability of customers and profit margin, as personal loans often have higher interest rates.
Many banks have attained big achievements from this strategy. Vietcombank has raised its outstanding retail proportion out of the total oustanding credit from 16 percent at the end of 2014 to 40.8 percent at the end of 2017, gradually realising the target of becoming the No.1 bank in retail by 2020.
For BIDV, the proportion of retail also increased sharply from 17 percent at the end of 2014 to 30 percent at the end of 2017.
For VietinBank, over the last three years, the average outstanding loans surged 137.5 percent. The proportion of outstanding retail out of total oustanding loans swelled from 17.8 percent at the end of 2014 to 25.2 percent at the end of 2017.
In fact, private commercial banks which do not have many advantages in the wholesale segment as most of the previously state-owned large businesses have sought retail segment for a long time. Many banks have also exploited and achieved quite impressive achievements in specialised retail segment i.e. consumer finance, typically VPBank’s FE Credit and HDBank’s HD Saison.
Some “rockies” such as Mcredit of the Military Bank, SHB Finance of SHB, with the backing of banks, also joined. Previously, Techcombank’s Techcombank Finance also marked milestones in consumer finance segment but was then sold to the South Korean Lotte.
“Reducing wholesale and increasing retail” has been the selection of the majority of banks but two private banks i.e. Techcombank and HDBank seem to be going on opposite direction.
As disclosed by Hochiminh City Securities Company (HSC), Techcombank has two worth noticing value chains associated with Vietnam Airlines and Vingroup.
The partnership with Vietnam Airlines has provided Techcombank with approximately 37,000 customers using co-branded credit card and debit card. These customers accounted for 13 percent of high-end and senior high-end customers with much higher card usage than those using other Techcombank cards.
Especially, these customers are having total oustanding loans at Techcombank at 6.5 trillion dong, equal to 15 percent of the total oustanding loans of the bank. It also contributed eight percent to the total non-term deposits and seven percent to Techcombank’s total net profit for service operation.
Meanwhile, Techcombank’s partnership with Vingroup is the strongest value chain of this bank. About 87 percent of Techcombank’s home loans come from the aforementioned ecosystem with 11,000 home borrowers, accounting for 64 percent. This value chain contributed eight percent to the total non-term deposits, and 24 percent to Techcombank’s total net profit from service operation.
For HDBank, after signing strategic cooperation agreement with Petrolimex along with the close relationship with Vietjet, this bank is able to access and exploit as many as 40 individual customers from the two aforementioned sources.
HDBank leader has recently said in the immediate future, with the target of exploiting $2-3 service fee revenue each year per customer, the bank expects to have hundreds of US dollar revenue from fee each year.
Although the revenue from exploiting customer database of large businesses comes from individual customers but in fact, Techcombank and HDBank have been dependent on these large businesses both in credit and deposits, similar to former state-owned banks.
It is not easy for other private banks to “imitate” Techcombank and HDBank because this type of ecosystem is formed based on some commitments/rather special relationship.
For example, Vietjet Air and HDBank have the same owner, Petrolimex and HDBank had special commitment about the merger with PGBank.
Or, like Techcombank CEO Nguyen Duc Vinh who used to have many years working as leader at Vietnam Airlines and previously, Vietnam Airlines used to be Techcombank’s major shareholder and Techcombank used to be the major shareholder of Vietnam Airlines. Even, the two sides used to cooperate to open up new airlines.
