General director of Vietnam Prosperity Commercial Joint Stock Bank (VPBank) Nguyen Duc Vinh said that the bank may return to more ambitious goals by 2021, but for the immediate future, the top priority is to ensure the debt recovery situation, good management of bad debts and cost optimisation.
VPBank announced positive business results in the first quarter (Q1) of 2020 with total consolidated operating income of 9.906 trillion dong, up by 24.4 percent over the same period of 2019, and consolidated pre-tax profit of 2.911 trillion dong, up by 63.3%.
The bad debt ratio of the consolidated bank fell from 2.95 percent to 2.59 percent by the end of Q1 2020. The parent bank’s bad debt ratio fell from 2.18 percent to 2.15%. the bank also showed a prudent provisioning policy with 3.712 trillion dong, up by 26.1 percent over the same period of 2019. For the parent bank alone, the provisioning expenses for customer loans increased by nearly 50 percent in the context of complicated developments of the pandemic.
Being cautious and ensuring safety are the messages that VPBank’s general director emphasized in the meeting with investors. In response to the Covid-19 pandemic, VPBank has built A, B and C development scenarios, corresponding to each severity of the pandemic.
Currently, Vietnam is one of the first countries to apply social distancing. The disease control is also positive. However, VPBank’s leaders said that the bank still focuses on the plan to ensure safety for the bank and liquidity of the system. “We expect the best thing to come, but also get ready for the worst. Before talking about growth, the top priority is to stand firm to overcome this period,” said Vinh.
Dmytro Kolech director of Risk Management Division of VPBank said that from the start of the disease, the bank has set out plans to ensure continuous operation. In order to do so, all the key units such as payment, information technology need to maintain continuous operations for the bank’s more than 200 branches, even in the case when the bank’s employees are infected or the headquarter is blocked.
Along with that, the bank ensures to maintain good liquidity reserve time. In the worse scenario when 60 percent of customers do not pay the debts and a large number of customers withdraw their deposits, this time can still last for two weeks.
For risk credit management activities, VPBank holds a prudent view. For individual customers and small and medium-sized enterprises (SMEs), VPBank has partly stopped lending to new customers, focused on cross-selling and serving existing low-risk customers. For the group of large enterprises, VPBank has strengthened the control of credit growth with affected customers, thereby helping to maintain low bad debt ratio.
Another priority of VPBank in addition to growth is to support customers hit by the Covid-19. Under the guidance of the State Bank of Vietnam (SBV), VPBank has restructured debts for affected customers, mainly individual and SME customers.
With careful preparation, VPBank has initially overcome the difficult period in Q1. However, Vinh said that the Covid-19 will have a profound impact on Vietnam’s economy in the long run, even when this pandemic ends.
Representative of VPBank said that the bank’s credit growth may fall in 2020 and the bank will not focus much on NIM optimisation. VPBank may have more ambitious goals in 2021.
From Q1 2020, VPBank showed a drastic cost reduction move. By the end of Q1, the bank’s Cost-income ratio (CIR) was only 33.1%, down from the 33.9 percent by the end of 2019. The bank’s leader board said that activities will continue to be streamlined to further cut CIR by one percent this year. Thanks to the cost reduction, the bank maintained a high profit in the leading group.
“The non-interest income of the parent bank this year may still increase by 30 40 percent thanks to the transactional banking strategy. The pre-tax profit of the parent bank will also increase by about one trillion dong over the last year. For FE Credit, since consumer lending was more affected, the expected target for FE Credit is more prudent,” said Vinh.
