It is not hard to find the answer to the question “Which bank is the most efficient business in Vietnam” when considering some key aspects. First of all, the performance of the credit sectorthe core business of all banks, is “sketched” through the ratio of net interest income to interest incomereflecting the gross profit margin of the segment.
Statistics of 14 listed banks with total assets of over 100,000 billion dong includingJoint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Joint Stock Commercial Bank of Industry and Trade (VietinBank), Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Vietnam Prosperity Joint Stock Commercial Bank(VPBank), Military Joint Stock Commercial Bank (MB), Saigon Thuong Tin Joint Stock Commercial Bank (Sacombank), Asia Joint Stock Commercial Bank (ACB), Hochiminh City Development Joint Stock Commercial Bank (HDBank), Saigon-Hanoi Joint Stock Commercial Bank(SHB), Vietnam Joint Stock Export Import Bank (Eximbank), Vietnam International Joint Stock Commercial Bank (VIB), LienViet Post Joint Stock Commercial Bank (LienVietPostBank) and Tien Phong Joint Stock Commercial Bank(TPBank) show that VPBank is leading in this respect, followed by MB, Techcombank and Vietcombank.
Retail credit is the key of the leading group, but not all banks are the same. VPBank focuses on consumer lending segmentthe segment with highest interest. Meanwhile, Techcombank and Vietcombank focus on lending to individuals but they do not accept unsecured loans. As for MB, this bank takes advantage of most segments and the most recent highlight is the consumer lending segment with the participation of Mcredit finance company.
Surprisingly, VIB and TPBank, which have the smallest total assets among the 14 banks, are ranked fourth and fifth respectively with net interest income over interest income ratio of 48 percent and 47 percent. The reason for their high gross profit margin is that they achieve the highest proportion of medium and long-term loans. The longer the tenor is, the higher the interest rate becomes but the greater the risk is.
Following are HDBank, ACB with the ratio of over 40 percent. Between the remaining two large state-owned banks, BIDV proved to be much more efficient than VietinBank in the credit sector with a ratio of 39 percent compared to 30 percent. The lowest is SHB with the ratio of only 24 percent, less than Sacombankthe bank is struggling to handle bad debts.
Although gross profit margin of credit sector is important, it reflects partly the business performance of that segment. On a general level, ROE and ROA are the two most common indicators that represent the results of businesses in general and the banks in particular.
Particularly for the banking segment, there are two types of equally important profits including net profit (profit before credit risk provisions) and pre-tax profit (profit after credit risk provisions).
In terms of net profit margin, ROE and ROA of VPBank still outperformed among banks with 59 percent and 6.33 percent respectively. As mentioned, consumer finance is the core segment of VPBankWhich has outstanding high interest ratesso the pre-provision profit margin will be very high. This is actually a trade-off, instead of the average profit margin associated with the average risk, followed by the average provisioning rate, VPBank chooses high profit margin, high risk, followed by high provisioning rate.
52 percent is the 2nd ROE, which belongs to BIDV, but ROA is only at an average level (2.16 percent). Meanwhile, Techcombank is ranked 2nd in terms of ROA (3.9 percent), but ROE is only at an average level (24 percent).
The most significant after VPBank is probably the cases of MB, Vietcombank and VIB. ROE and ROA of these three banks are quite high at 32 percent, 40 percent, 32 percent and 2.98 percent, 2.39 percent, 2.42 percent respectively. They are all in the top Five in terms of both ROE and ROA.
Two last positions belong to Eximbank and Sacombank.
In terms of pre-tax profit margin, the top spot is no longer VPBank. The bank with the highest ROA is ACB with 30 percent, slightly higher than the “runner-up” Vietcombank (29 percent). VPBank and VIB are ranked 3rd and 4th with 26.5 percent and 25.7 percent respectively.
Meanwhile, the bank with the highest ROE is Techcombank with 3.32 percent, followed by VPBank and MB with 2.84 percent and 2.14 percent.
The last position continues to belong to Eximbank and Sacombank.
In general, VPBank is the most mentioned name of “champion” in terms of gross profit margin of credit segment and net profit margin, ROE “runner-up” and ranked 3rd in ROA when considering pre-tax profit. Techcombank, Vietcombank, MB and VIB are following tightly.
