Banks earn huge services profits

Financial statements recently released reveal the total net profit from service activities of 14 listed banks with total assets of more than VND100 trillion (US$4.27 billion) last year rose by 21 per cent compared to the previous year to VND24.6 trillion (US$1.05 billion).

In the group of large-sized banks, three State-owned banks –Vietcombank, VietinBank and BIDV – led the way in terms of earning profits from services outside credit activities last year.

BIDV was the top earner with VND3.550 trillion of net profit, up 20 per cent compared to 2017. The surge helped BIDV take over the top spot from the country’s largest private bank, Techcombank, which experienced a decline in net service profit in 2018 with only VND3.536 trillion.

Vietcombank and VietinBank also gained with VND3.401 trillion and VND2.770 trillion, up 34 per cent and 49 per cent, respectively.

However, in terms of growth, Military Bank came out in top position with a whopping surge of 127 per cent to VND2.563 trillion, which helped the bank rank sixth in the list, up three places against 2017.

In the group of smaller banks, three banks – TPBank, HDBank and LienVietPostBank – also posted earnings from services of more than 100 per cent last year. Specifically, the net profit from services of TPBank soared by 310 per cent to VND676 billion while the rising rates of HDBank and LienVietPostBank were 114 per cent and 128 per cent to VND438 billion and VND148 billion, respectively.

According to the banks, besides payment services, insurance services have been also become one of main contributors to the banks’ rising income from the service segment.

Some banks are now recording large proportion of revenue from insurance services, such as VPBank, MB and SHB. The revenue from this activity accounted for 71 per cent of SHB’s service revenue, 50 per cent of MB’s, and 57 per cent of VPBank’s.

For big banks, the revenue from services mainly came from payment services. For example, Vietcombank’s revenue from payment accounted for 66 per cent of its total service revenue.

More investment on the cards

According to experts, banks are investing significantly in services, instead of only focusing on credit activities in the hope of gaining higher profits from the potential segment this year, especially when the central bank committed to tighten credit growth.

With more than 95 million people and sharply increasing consumption, Viet Nam is considered an attractive destination for the retail banking segment, which is why banks have strategically planned to boost the segment.

In fact, the in-cash habit of Vietnamese people is no longer an obstacle to the development of card network and non-credit services. Several banks are aiming to give their customers a variety of non-traditional credit services, such as savings and transactional accounts, mortgages, personal loans, debit and credit cards.

In recent years, many banks have considerably improved the quality of their retail banking services to enhance competitiveness. They are also focusing on other aspects such as marketing, technology and human resources to attract more individual customers to non-credit services.

Ngiem Xuan Thanh, Vietcombank’s chairman, said services would be key to making a sustained and stable profit for the banking sector this year. The development of non-credit services contributes to diversifying bank’s services, thereby bringing more customers. This type of service will also disperse risks and create higher profits for commercial banks.

According to Tran Du Lich, a member of the National Financial and Monetary Policy Advisory Council, the revenue from fees and retail banking are becoming one of the main income sources of some banks, so the move to invest in retail services is inevitable in the future.

Based on the results gained, leaders of commercial banks said they would continue to apply this business strategy, with a focus on services in the future.