Fees, retail services to be banks’ main income
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Commercial banks are expecting the revenue from fees and retail banking services to become their main income sources this year, as a result of rising market demands.
According to Nguyễn Đức Vinh, general director of VP Bank, after years of investing in the financial company FE Credit, his bank was expecting to receive a large profit from the company in 2018.
FE Credit started to gain profits from the retail banking segment in 2016, and the profit improved continuously last year. VP Bank’s financial reports showed that the bank’s profits last year hit a record high of more than VNĐ6.43 trillion (US$283.25 million), of which FE Credit made up some 51 per cent.
Vietcombank also expects to better exploit the potential retail banking segment this year, as it recruited Thomas William Tobin, a Canadian foreign senior expert in retail banking, last year, to be its retail banking director. It was the first time the State-owned bank appointed a foreigner in its management board, showing its priority for the retail banking segment.
Vietcombank’s chairman Nghiêm Xuân Thành hoped that the expert, who has expertise in global and Vietnamese finance, will help the bank make a leap in the retail banking segment.
Vietcombank is targeting to become the country’s leading bank in retail segment in 2020, Thành said.
According to Nguyễn Đình Tùng, general director of the Orient Commercial Joint Stock Bank, his bank is expected to earn a pre-tax profit of more than VNĐ1 trillion in 2018, thanks to specific strategies in the sales of financial products, especially in non-credit services.
Some other banks have also planned to better exploit the potential business segment in 2018 through mergers and acquisitions last year. Typically, Shinhan Bank Vietnam acquired ANZ’s retail banking services or the Vietnam International Bank (VIB) acquired the HCM City’s branch of Commonwealth Bank of Australia.
“FE Credit started to gain profits from the retail banking segment in 2016, and the profit improved continuously last year.”
According to experts, banks are investing significantly in retail banking services, instead of only focusing on corporate lending in the hope of gaining higher profits from the potential segment this year.
With more than 93 million people and sharply increasing consumption, Việt Nam is considered a hot 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. Thus, 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.
Notably from the beginning of this year, many banks have considerably improved the quality of their retail banking services to enhance competitiveness in the market. They are also focussing on other aspects such as marketing, technology and human resources to attract more individual customers to non-credit services.
The move was decided after the retail banking segment contributed to a large amount of the total profits of many banks last year. BIDV and MB Bank, for example, gained high profits last year, thanks to a 34 per cent to 35 per cent rise in retail banking services.
Nguyễn Thanh Nhung, general director of VietBank, said retail banking services would be a 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, said Nhung.
According to Trần Du Lịch, a member of the National Financial and Monetary Policy Advisory Council, banks currently not only gain profits from lending but also from retail banking services, 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 continually apply this business strategy, with a focus on retail banking services next time.
Questions & Answers
Q.Which specific strategies are banks implementing to boost revenue from retail banking services this year?
Which specific strategies are banks implementing to boost revenue from retail banking services this year?
Banks are investing significantly in retail banking services, improving service quality, and focusing on marketing, technology, and human resources to attract individual customers. They are also diversifying services to include non-traditional credit options like savings, transactional accounts, mortgages, and various cards.
Q.What role has FE Credit played in VP Bank's recent financial performance?
What role has FE Credit played in VP Bank's recent financial performance?
FE Credit made up about 51 per cent of VP Bank's record high profit of over VNĐ6.43 trillion last year. The financial company started gaining profits from the retail banking segment in 2016, with continuous improvement since.
Q.What is Vietcombank's ambition for its retail banking segment?
What is Vietcombank's ambition for its retail banking segment?
Vietcombank aims to become the country's leading bank in the retail segment by 2020. They demonstrated this priority by appointing a Canadian expert, Thomas William Tobin, as their retail banking director last year.
Q.How has the market for retail banking in Vietnam evolved, according to the article?
How has the market for retail banking in Vietnam evolved, according to the article?
The in-cash habit of Vietnamese people is no longer hindering the development of card networks and non-credit services. This, combined with a large population and increasing consumption, makes Vietnam a prime destination for retail banking.
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