Which banks attain the highest profit from services?

01-Nov-2018 Intellasia | Tri Thuc Tre | 6:26 AM Print This Post

Eight banks have reported net service income of over one trillion dong after the first nine months of 2018.

In absolute number, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) is currently the best performing bank in terms of service activities with up to 2.6 trillion dong of service income attained in the past nine months, up by 34 percent compared to the same period of 2017. Although the increase was fairly impressive, the contribution into Vietcombank’s total operating income has not been much improved, reaching just around nine percent.

Explaining the increase in service income, Vietcombank said that the bank plans to upgrade its information technology (IT) system to support its services, develop some new applications for customers, improve service quality, and increase transaction for enhance revenue growth.

There is no more detailed explanation from Vietcombank, but it is most likely thanks to the big contribution from payment services and cash services. In 2017, Vietcombank recorded the highest revenue in the system from this segment.

According to Stoxplus, the service activities of Vietcombank are expected to further boost thanks to bancassurance as the bank is having the largest customer database. However, the bank has not strongly focused on accelerating revenue from insurance sales. Many sources said that Vietcombank is openly seeking insurance partner with a total value of up to one billion US dollars.

Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) and Vietnam Technological and Commercial Joint Stock Bank (Techcombank) also posted service income of above two trillion dong in the first nine months of 2018 with respectively 2.541 trillion dong (up by 19%) and 2.113 trillion dong (up by 25%). Techcombank offered a relatively detailed notes for its service activities. Accordingly, apart from payment and cash services, insurance cooperation and securities issuance underwriting were the bank’s main source of income.

Following the above banks are four more banks with service income of above one trillion dong, including Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), Military Commercial Joint Stock Bank (MBB), Asia Commercial Joint Stock Bank (ACB), and Vietnam Prosperity Commercial Joint Stock Bank (VPBank). In this group, MBB recorded the highest increase with 63%, reaching 1.688 trillion dong service income, mainly thanks to the surge in insurance business and services (contributing 860 billion dong, 3.2 times higher than the same period of 2017).

Although Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) has not released its financial statement, it is likely that the bank will still be included in this group as it earned nearly 1.2 trillion dong of service income in the first six months of the year.

Considering the proportion of net income from service activities on the total operating income, banks have not seen much improvement. This ratio was just around two to five percent at small-scaled banks, less than 10 percent at large banks such as BIDV and Vietcombank, and the highest ratio of above 12 percent was recorded at medium and large-scaled private banks such as Sacombank, Techcombank, MBB ACB, Vietnam International Joint Stock Bank (VIB) and Tien Phong Commercial Joint Stock Bank (TPBank).

Techcombank and Sacombank are having the highest proportion of service income in the system with respectively 16 percent and 22%. Both of them made two major insurance cooperation in the end of 2017. Accordingly, the proportion of service income of Sacombank last year reached up to 40 percent and that of Techcombank was 28%. Despite not recording unexpected revenue as last year, insurance business has still brought fairly stable income to these two banks.

Banks that recording the strongest improvement in the proportion of income are VIB, TPBank and HCM City Development Commercial Joint Stock Bank (HDBank).

At TPBank, the proportion of service income in the first nine months this year surged to 10.9 percent from 5.1 percent in the same period of 2017. This significant increase has contributed to increase the bank’s profit although its lending was limited in the third quarter as it hit the SBV’s ceiling. HDBank’s proportion of service income also increased from 1.9 percent last year to five percent this year, and that of VIB increased from 8.7 percent to 12.2%. The common point of the three banks was the unexpected revenue from insurance commission. However, their income from payment services was also very impressive, increasing by 2.5 times at TPBank and 74 percent at VIB.

Statistics from the 20 banks which have published their financial statements, 16 out of 20 banks posted higher profit from service activities in the first nine months of 2018 compared to the same period of 2017. The four remaining banks including VPBank, An Binh Commercial Joint Stock Bank (ABBank), Bac A Commercial Joint Stock Bank (BacABank) and Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank) only saw slight decline. VPBank’s profit from services declined by three percent, but still reached over 1.004 trillion dong; while that of ABBank declined by two billion dong to 128 billion dong, of BacABank fell by three billion dong to 37 billion dong, and of VietBank dropped by two billion dong.

Some banks recorded reduction in their business segments but steady growth in services. For example, Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) in the third quarter experienced seven percent decline in net income, 21 billion dong loss in foreign exchange trading, 57 billion dong loss in other business activities but 76 percent increase in service income compared to the same period of 2017, reaching 42 billion dong. That helped increase the bank’s service income in the first nine months of 2018 to 83 billion dong, doubling the same period of 2017.

It can be seen that service activities have brought fairly stable income with insignificant developments like foreign exchange business or securities trading, etc. Thus, the plan to raise the proportion of non-credit income is still said to focus on service activities. In the context of the 4.0 revolution where non-cash payment has been promoted, banks are racing to develop and enhance services, particularly modern services such as internet banking, digital banking and livebank, etc.


Category: Finance, Vietnam

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