Banks realise huge profits from the bancassurance race

24-Apr-2019 Intellasia | Zing News | 6:38 AM Print This Post

Interests from services of banks increased sharply in the first quarter. Most of the growth momentum came from a service activity called bancassuranceinsurance service.

The report on the business results of the banks announced in the first quarter of 2019 showed that the profits increased strongly compared to the same period last year.

Contributing to this increase in addition to income from credit activities, there is also a significant part from the accompanying banking service activities, the largest of which is insurance.

Great profit in the first quarter thanks to the service

The consolidated financial statements for the first quarter of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) stated that in the first three months of this year, the bank earned a total of 5.878 trillion dong of pre-tax profit, up by 35 percent over the same period. This momentum is also far ahead of the growth target of only 12 percent of the whole year profit that the bank’s management had previously proposed.

Notably, in addition to the credit sector, which contributed the most to the above growth rate when bringing 8.498 trillion dong of net interest income (up 37%), the service activities also contributed 1.069 trillion dong to the total operating income of the bank.

Compared to the same period, the service sector at Vietcombank has increased by 21 percent and is the second largest single income source of the post-credit bank.

Meanwhile, the report of Military Joint Stock Commercial Bank (MB) stated that in the first quarter, the bank earned 2.424 trillion dong of pre-tax profit, up by 26%. Maintaining the increase in the previous period, the credit sector continued to be a pillar of MB when bringing in 4.134 trillion dong net interest income in the quarter, up by 26%.

However, the bank’s profit from services unexpectedly increased by 2.4 times in the previous period, reaching 758 billion dong in the first quarter only. This amount of interest also contributed nearly 14 percent of total quarterly operating income. Recently, during the same period of 2018, this contribution rate was just over seven percent.

The same thing happened at Vietnam International Joint Stock Commercial Bank (VIB) when the total operating income of the bank in the first quarter reached 1.714 trillion dong, up 37 percent over the same period.

In particular, the business segment with the strongest increase in the past quarter was also the service when it increased by 2.7 times, reaching 348 billion dong. Thereby, this activity also accounted for 20 percent of the total operating income of the bank, while the same period only contributed more than 10%.

At banks announcing reports so far as Saigon Thuong Tin Joint Stock Commercial Bank (Sacombank), Tien Phong Joint Stock Commercial Bank (TPBank) and Bac A Joint Stock Commercial Bank (Bac A Bank) all showed that the service sector grew very strongly in the first quarter, even in times compared to the same period.

The notable point in the profit from service activities of the banks in the past quarter is that most of this growth momentum comes from activities named insurance servicesbancassurance.

While in the first quarter of last year, the business and insurance services only accounted for a small proportion in the structure of service revenue of the bank, in the first quarter of this year, bancassurance became the main revenue source in service activities.

At MB, the business and insurance services business in the last quarter accounted for nearly 61 percent of the total profit from service activities. Revenues from this service increased sharply last year thanks to the rise of insurance services. Gross profit from this service at MB increased sharply from 38 billion (Q1/2018) to 462 billion dong (Q1/2019), 12 times higher.

At TPBank, while in the same period last year, revenue from insurance business and services accounted for only 17 percent of total service revenue, in this period, the proportion increased to 31%. Insurance also became the strongest growth service of TPBank in the first quarter when it increased five times over the same period (from 17 to 86 billion dong).

At VIB, the sudden growth in the bank’s service segment the previous quarter also came from insurance commission fees. Accordingly, this segment of VIB increased 10.5 times in the same period last year, reaching 209 billion and is the largest growth segment of the bank.

According to insurance industry report, insurance distribution via bankbancassurance can contribute up to 50 percent of the entire life insurance industry’s revenue in the next three years.

In fact, many customers said that they recently received invitations to buy life insurance when conducting banking transactions. The bank staff also said that insurance sales activities are being promoted by banks and assigned targets to each employee such as the mobilisation, lending and issuance of bankcard targets.


Category: Finance, Vietnam

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