Private banks strengthen against public banks | Bank and finance

It can be seen that private banks have now implemented many breaks in business plans and are even preparing to overtake the good performance of the commercial banks of the Big 4 Group.

Race for profits

Vietcombank has just released its consolidated financial statements for the first quarter of the year, showing a pre-tax profit of over VND 9.95 trillion, an increase of 15.3%. However, in the first quarter, Vietcombank lost its former position as the number one champion. Private joint-stock commercial bank, Vietnam Prosperity Joint Stock Commercial Bank (VPBank), managed to propel Vietcombank into second position. According to its consolidated financial statements for the first quarter, VPBank posted a pre-tax profit of VND 11.14 trillion, up 178% from the same period last year.

The third and fourth positions are now held by Techcombank, which made a profit of over VND 5.52 trillion, and the Military Commercial Joint Stock Bank (MB Bank), which made a profit of VND 5.91 trillion. , respectively. The trailing positions are held by VietinBank with profits of VND5.82 trillion, and Bank for Investment and Development of Vietnam (BIDV) which made a profit of VND4.51 trillion. In 2020 and 2021, BIDV’s pre-tax profit was lower than that of private banks such as Techcombank, MB Bank and VPBank.

Previously, three banks of the Big 4 group, namely Vietcombank, BIDV and VietinBank were usually among the top three to lead the profits, and in 2014, 2015 and 2016, this group followed each other in a close connection of only a few. . one hundred billion dong. Since 2018, Vietcombank has accelerated its pace and is far ahead of any other bank. At the same time, a few private banks such as Techcombank, MB Bank and VPBank gradually started to overtake the other two banks in the Big 4 group. VPBank’s profit rose sharply to reach VND 7.11 trillion in the first quarter , with a net profit from other activities, mainly from cooperation with insurance partners.

The private banking group mentioned above has set a profit target of over VND 20 trillion for this year. Specifically, VPBank expects strong credit growth of 35% at its parent bank. The bank also expects a profit of over VND23 trillion, up 66% over the same period. At Vietcombank, this year’s pre-tax profit will increase by at least 12%, exceeding VND 30.67 trillion.

Techcombank is following closely with a target of VND 27 trillion in consolidated profit before tax (EBT). BIDV aims to reach VND20.6 trillion in 2022, while VietinBank is expected to reach VND19.3 trillion. MB Bank has set a profit target of VND20.3 trillion and sets strategic financial targets with growth above the industry average, with revenues and profits expected to increase fivefold by 2026.

Competing posts

At the last Annual General Meeting (AGM), VPBank presented to its shareholders a plan to sharply increase the share capital to almost VND 80 trillion, through two private placement options for foreign investors and the payment of dividends and free shares from equity. VPBank currently has a registered capital of VND44.45 trillion, ranking fourth after Vietcombank with VND47.32 trillion, VietinBank with VND48.06 trillion and BIDV with VND50.58 trillion. VPBank is a private bank with the highest share capital.

Vietcombank is expected to issue nearly 856.6 million shares to pay dividends at the rate of 18.1%, raising the share capital to VND 55.89 trillion. BIDV also plans to increase its registered capital by VND 10.62 trillion, reaching VND 61.21 trillion this year, an increase of 21%. VietinBank has been approved by shareholders to raise capital from almost VND 48.06 trillion to VND 53.75 trillion, through the issuance of shares to pay dividends from profits after taxes, fund deductions and dividends in cash in 2020.

With the above plan, VPBank will be a private bank that will rise to the top of the ranking of registered capital in the banking system, while Techcombank does not rush to increase the registered capital. This year, the latter bank plans to issue only about 6.3 million shares of the employee stock ownership plan (ESOP) at 10,000 VND per share for its employees. After a successful issuance, the bank’s registered capital will increase to over VND 35.17 trillion.

Techcombank executives said that currently the State Bank of Vietnam or international organizations assess the bank’s equity and not the registered capital. However, Techcombank’s capital adequacy ratio (CAR) is also high at 15% compared to the 8% requirement. In addition, Techcombank also aims to be among the top ten ASEAN banks by 2025 and has launched a five-year strategic plan since 2021.

When comparing the group of state-owned commercial banks and the leading group of private commercial banks, the credit growth of private banks is stronger due to a higher capital buffer, i.e. say of a high CAR. Besides Techcombank, MB Bank has a CAR of 11.2% and Vietnam International Commercial Joint Stock Bank (VIB) of 11.7%, which helps these banks maintain a remarkably high credit growth rate.

The private banking group has a strong business acumen that it applies in its growth strategy. For several years, they have been fiercely competing in the digital banking segment, resulting in a steady increase in the share of demand deposits. At the end of 2021, the Current Account Savings Account (CASA) ratio of Techcombank was 50.5% and MB Bank was 49%. As such, maximizing operational efficiency is more important than ever, and digitization is essential for the growth of the private banking group.

With a digitization strategy, banks can significantly reduce operating costs, mobilization costs and increase service revenues. Currently, the benefit of maintaining a high CASA ratio has been recognized by public banks. Except for Vietcombank, which is continuously developing CASA, other public banks have also launched promotional campaigns to attract individual customers and increase their online transactions.