How did Vietcombank make huge profit in 2020?

14-Jan-2021 Intellasia | BizLIVE | 6:02 AM Print This Post

On January 11st, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) held a conference to summarise year 2020 and carry out the 2021 business plan.

“After reducing interest rates and transaction fees to support customers (nearly four trillion dong), increasing the provisions for credit risks, and raising the bad debt coverage ratio to a record high level, the business performance of Vietcombank continued to outperform among credit institutions (CIs),” reported at the conference.

Specifically, for the first time, the net profit from business activities before risk provisioning of Vietcombank reached the highest level in the system, the separate pre-tax profit was 22.529 trillion dong, and the consolidated profit was 23.068 trillion dong, equivalent to 2019′s.

According to Vietcombank’s report, the bank’s profit in 2020 rely heavily on lending, and was getting closer to a balance with non-credit sources.

In 2020, the net income from non-credit activities of Vietcombank accounted for 49.8 percent of the income from business activities, up by 10.7 percent compared to 2019.

In the above structure, the net income from capital trading and investment activities accounted for 21.1 percent of the bank’s operating income. The net income from services and other income accounted for 28.6 percent of the operating income, up by six percentage points compared to 2019. In particular, the net income from foreign currency trading rose by 16 percent compared to last year and contributed 37.8 percent to the service income; while the income from bancassurance services was 1.873 trillion dong, contributing 18.1 percent to the service income.

Year 2020 is also the first year the bancassurance deal between Vietcombank and FWD was implemented and generated revenue. The First Year Premium revenue under the contract with FWD (started from April 13th 2020) reached 371 billion dong, completing 108 percent of the 2020′s year plan. The total FYP in 2020 reached 417 billion dong, up by 94 percent compared to 2019, completing 105 percent of the year plan in 2020.

In addition, Vietcombank recovered 2.418 trillion dong of off-balance sheet bad debts. If including those collected at the beginning of 2021, the recovered off-balance sheet bad debts have reached 3.425 trillion dong.

With the above results, Vietcombank’s Return on Average Assets (ROAA) and Return on Average Equity (ROAE) of Vietcombank were maintained high at respectively 1.42 percent and 20.48%.

According to the above report, Vietcombank managed to control problematic debts at the lowest level among state-owned CIs. The bank’s bad debt ratio was 0.61%, the outstanding balance of risk reserve fund was 19.344 trillion dong, and the bad debt coverage ratio accordingly reached the highest level in the banking system with about 377%.

At the conference, Vietcombank set up key business targets in 2021, such as total asset growth of about six percent, mobilisation growth in market 1 of about eight percent, expected credit growth of 12%, bad debt ratio of below one percent, Net Interest Margin (NIM) of 3.1%, expected pre-tax profit growth of 12 percent to reach 25.2 trillion dong.

 

Category: Finance, Vietnam

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