Vietnam International Commercial Joint Stock Bank (VIB) has just recorded a new record of profit. According to the semi-annual financial report of 2019, the first half of the year, VIB recorded 1.82 trillion dong of pre-tax profit, up by 58 percent compared to the same period last year and is the bank’s highest annual semi-annual profit.
Credit and financial service were the two main segments that brought profit to VIB. In the first half of the year, the credit segment earned 2.917 trillion dong of net profit, up 29 percent; Meanwhile, the service segment brought in 764 billion dong of net profit, doubling the same period last year.
This impressive growth followed the good results achieved by the bank in 2018, when the profit before tax recorded an increase of 95 percent to 2.742 trillion dong thanks to a 40 percent increase in net profit from credit and an increase of 80 percent in net profit from services.
In the past few years, VIB has carried out a deep strategic transformation with the focus on developing individual customers, with the focus on home loans and car loans.
VIB’s mortgage loans increased by 96 percent in 2017, an increase of 45 percent in 2018 and an increase of 19 percent in the first half of 2019. Meanwhile, outstanding loans for car loans increased by 161 percent in 2017, an increase of 59 percent in 2018 and an increase of 23 percent in the first half of 2019.
VIB is currently the leading bank in car loan market share in the banking system.
This was the main reason for VIB’s position as a market leader in retail lending growth. In 2017, the bank’s outstanding loans to individual customers amounted to 79 percent, increasing the proportion of outstanding loans to individual customers to 63.5 percent of total outstanding loans (from 47,1 percent of 2016).
In 2018, VIB’s individual customer loan growth reached 40 percent, increasing the proportion of individual loans to 74 percent. This figure in the first half of 2019 was 22 percent and 75.5 percent respectively.
VIB did not disclose the exact number of home loan outstanding and outstanding loans for car loans. However, a report of HCM City Securites Corporation (HSC) published in February 2018 stated that in 2017, home loan outstanding accounted for 50 percent of personal loans, outstanding loans for car loans accounted for 40 percent, while 10 percent was other personal loans.
This means that in 2017, loans to buy houses and buy cars accounted for 90 percent of VIB’s loans to individual customers (according to HSC data) and accounted for 57.8 percent of total outstanding loans ( calculated from HSC data). Outstanding loans of 2018 were definitely larger because the growth of outstanding loans for mortgage loans and car loans was very high (45 percent and 59 percent respectively).
Another report of SSI Securities Corporation announced in March 2019 showed a different data. According to SSI, in 2017, VIB’s outstanding loans for housing and car buying accounted for 49 percent of total outstanding loans (accounted for 77 percent of outstanding loans to individual customers).
In 2018, outstanding loans for buying houses and buying cars accounted for 61.5 percent of total outstanding loans (accounted for 83 percent of outstanding loans to individual customers).
Thus, in 2018, the outstanding loans for home loans and car loans at VIB accounted for over 80 percent of personal loans and accounted for over 50 percent of total outstanding loans. This showed that the bank’s credit was currently heavily dependent on the home loan and car loans segments. Profit also came from these two segments.
For services, at VIB, most of net profit came from bancassurance segment (insurance distribution through banks), followed by payment services.
In 2017, bancassurance segment only brought 79 billion dong of insurance commissions for VIB. In 2018, this index increased to 239 billion dong (contributing to 76 percent of Prudential’s bancassurance revenue).
Particularly in the first half of 2019, VIB insurance commission fee was 436 billion dong, 5.3 times higher than the same period in 2018, even higher than the implementation of 2018.
Payment services also began to bring significant benefits to VIB from 2018 with income of 335 billion dong, 1.5 times higher than 2017. In the first half of 2019, revenue from payment services of this bank continued to increase 1.5 times compared to the same period in 2018 and equal to 70 percent of the implementation of the whole 2018, reached 235 billion dong.
The obvious growth in VIB’s payment services segment was because the bank invested quite a lot in payment solutions, especially credit card.
According to data from VIB, in 2018, the number of new issued cards of this bank increased by 75 percent compared to 2017. VIB also ranked first in terms of credit card spending per user (increased by 200 percent in 2018). Total card spending increased by 300 percent in the past year. Particularly in December 2018, a record of 1 trillion dong per month was reached. VIB’s card usage rate was also high, 65 percent compared to the system average of 36 percent.
Although the prospects for the future are still quite good, VIB’s profit growth is slowing down as the outstanding loans for home loans and auto loans are also slowing down.
This is necessary because the handling of bad debts related to car loans is complicated, so more caution is needed after a period of rapid expansion. In addition, home loan with certificate of land use rightsa relatively safe segment that VIB has chosenis hard to rapidly grow in the long term. If the bank extends a lot to the loan for buying house projects, the risk will not be easy to control.
However, VIB will definitely take new steps. Big prospect is for payment services and beyond is digital banking.
