After achieving positive business results in the first half of 2019, Vietnam Prosperity Joint-Stock Commercial Bank (VPBank)’s revenue and profit growth momentum continued to be maintained in July, making the bank confident to exceed the profit target set for the year.
At a meeting with analysts on the stock market at the end of August, a representative of VPBank revealed that the bank’s profit growth rate continued to be maintained well in the following month. Specifically, the bank’s profit increased by about 1 trillion dong in July 2019 alone, bringing the total profit of VPBank in the first seven months to 5.3 trillion dong, equivalent to 56 percent of the yearly plan. Total operating income as of the end of July also increased to 20 trillion dong. If in July only, the profit of 1 trillion dong was also 42 percent higher than the same period in 2018.
Le Hoang Khanh An, acting Chief Financial Officer VPBank, said that all VPBank’s business activities achieved the expected results, creating a solid growth momentum for the bank to meet and exceed the profit targets set from the beginning of the year.
Specifically, credit growth reached 12.5 percent in the first seven months, with a good growth in the proportion of short-term loans. According to VPBank’s report, the proportion of short-term loans of the bank increased from 33 percent in late 2018 to 35 percent in the first half of 2019, thanks to the positive contribution from credit card products.
That made the bank slower, because it wanted to grow more solidly, thereby saving on provisions in 2019.
The bank’s provision expense in the first seven months of 2019 increased by 18 percent compared to the same period in 2018. That was a much lower increase than the growth rate of 2018 with 2017. In addition, the change in loan structure and the improvement in debt collection capacity brought the consolidated non-performing loan (NPL) ratio to less than three percent as of the end of July 2019. NPL ratio of VPBank only was even at only 2.34%. Outstanding loans at Vietnam Asset Management Company (VAMC) decreased from 3.1 trillion dong at the end of 2018 to 1.2 trillion dong at the end of July 2019.
VPBank leader said that 2019 was an important year for the bank to improve operational cost and provision management. From next year, provision expenses would be more reasonable, and banks would continue to reduce operating costs to increase profits. In total revenue, one-third was the operating cost, one-third was the contingency cost, and the rest was profit. If both types of costs reduced, profit would increase. That was the ideal model of the system.
Not only increased the effectiveness of the parent bank’s business operations, FE Credit’s business results, consumer finance company owned by VPBank, also showed positive signs during the year.
Kalidas Ghose, Chief Executive Officer (CEO) of FE Credit, said the disbursement value of the largest financial company in the market reached nearly 20 trillion dong in the first six months. Besides, only in Q2, the number of contracts reached nearly 1.3 million new contracts, an increase of 57 percent over the same period in 2018. Credit card continued to increase strongly, with an average growth rate of 40 percent in both cumulative total number of cards issued and total size of credit card outstanding balance over the same period in 2018.
Particularly in Q2, FE Credit’s profit before tax increased by 110 percent compared to the same period last year, reaching 1.3 trillion dong. Profit before tax over total operating income reached 30%, while the cost-to-income ratio decreased from 33 percent at the end of Q1 to 30 percent at the end of Q2, thanks to cost control and investment in innovation and business activities.
In addition, FE Credit’s bad debt continuously improved, falling from 6.4 percent at the end of Q2/2018, to 5.4 percent by the end Q2/2019. The above results came from an effective sales strategy, increasing investment in digitalisation and automation of FE CREDIT systems, moving from traditional sales model to automated technology platform (FE 2.0), progressing to FE 3.0 with a more advanced automated analysis system and a diverse product ecosystem to ensure the best services.
With the positive results of both FE Credit and individual bank, VPBank is gaining a solid stepping stone to exceed the profit target of the year and improve growth in the following years.
