LienVietPostBank has two growth drivers

30-Oct-2020 Intellasia | NDH | 6:02 AM Print This Post

Viet Capital Securities JSC (VCSC) had just released an evaluation report on Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank, LBP). Conversion of post office transaction offices (PTO) into banking transaction offices (BTO) could help LienVietPostBank provide various banking products and services to underserved localities, especially rural, remote areas, the primary target market for the bank in the near future.

According to this securities company, having an extensive PTO network after Circular No. 43/2015 was approved (the bank received 1,067 PTO in 2016), LienVietPostBank was positioning itself to carry out such strategies as Rakyat Bank Indonesia and China Savings Post Bank on providing banking services to previously underserved customers.

The key to this strategy was the continued investment to upgrade PTO to BTO. That led to operating expenses (OPEX) and a relatively high cost-to-income ratio (CIR) over the past three years. The manager believed that once the transition was over (possibly 2021) and the upgraded PTO would be successfully operated in rural areas, LienVietPostBank could earn more revenue to compensate for OPEX’s high level.

Bancassurance was the primary driver to boost service income growth (NFI) in the future. NFI had achieved three-digit growth over the past three years following an exclusive five-year bancassurance partnership between LienVietPostBank and Dai-ichi Life Vietnam, which was formed at the end of 2016.

In 2019, LienVietPostBank assigned many BTO to sell bancassurance through a direct model (sold by bank employees) instead of a referral model (sold by insurance company’s employees). From the VCSC’s point of view, by 2020, the direct model had been widely deployed and would be expanded over the next few years, which could help the bank to grow NFI even higher. VCSC assumed that LienVietPostBank would enter into a new exclusive bancassurance contract in 2022 after the previous exclusive contract with Dai-ichi Life expired.

The issuance of capital by 2021 would help create room for further growth. As of the first six months of 2020, the capital adequacy ratio (CAR) of the bank was 8.6%, only slightly higher than the minimum regulated 8 percent level. According to VCSC, this CAR was not enough for the bank to achieve its set targets, especially when credit growth demand would be 16 percent to 18 percent after completing the management network transformation. Hence, VCSC believed that a capital issue in 2021 would be needed to give room for long-term growth prospects.

In 2020, VCSC forecasted LienVietPostBank would achieve a net interest income of 5.995 trillion dong, decreasing by one percent year-on-year. Service income, including foreign exchange income, was 677 billion dong, increasing by 48%. Pre-provision profit reached 2.545 trillion dong, rising by three percent. Profit after tax after minority interests was 1.596 trillion dong, dropping by 0.3%.


Category: Finance, Vietnam

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