The Vietnam International Bank (VIB) has just held an online meeting with analysts and investors. At the meeting, the bank’s representatives presented the business results in the first 6 months of 2021, the strategy of maintaining high and sustainable growth momentum that has been established for many years, combined with promoting customer support and community in the face of complicated developments of the Covid-19 pandemic.
The online event attracted more than 180 representatives from large funds, securities companies, independent analysts and media. The content of the discussion revolved around 3 main topics: (1) VIB’s strong business results in the first half of 2021, shared by Mr. Hoang Linh – CFO; (2) Key business strategies that help VIB become the top retail bank in Vietnam, presented by Ms. Tran Thu Huong – Head of Strategy cum Head of Retail Banking, and (3) Digital banking as the future of retail business, shared by Mr. Tran Nhat Minh – Deputy CEO cum CIO.
Continue to expand profit margin while supporting customers and community
Since the pandemic happened in Vietnam, VIB has several times reduced lending interest rates for corporate and individual borrowers to support our customers during this difficult time. Simultaneously, VIB aims to continue expanding its Net Interest Margin (NIM) by promoting the development of the retail segment and optimizing funding costs.
VIB’s report shows that the NIM trend in the last 6 quarters has improved significantly due to the reduction in Cost of fund (COF). VIB’s COF decreased from 5.4% in Q1 2020 to 3.8% in Q2 2021. NIM increased from 3.9% in Q1 2020 to 4.6% in Q2 2021. In this regard, Mr. Hoang Linh said, VIB has actively optimized the funding cost by promoting the growth of CASA, and at the same time, increasing low-cost funding source on international market.
Recently, VIB has just signed off on a syndicated loan worth USD260 million over three years with the Asian
Development Bank (ADB) and a number of international financial institutions. The bank is also implementing a plan to digitize all CASA and Deposit products to further grow this capital source.
On the other hands, with the orientation of focusing on the retail strategy, VIB’s retail loan balance in the first 6 months grew by double digits, reaching 14.2%, even during the pandemic, accounting for nearly 90% of the total outstanding loan balance. The retail portfolio helps VIB reduce concentration risks and adapt well to the current volatile market environment. VIB is also the bank with the highest retail loan proportion in the market today.
Maintaining a strong balance sheet
As of June 30, 2021, VIB’s total assets reached over VND277 trillion, credit balance was over VND185 trillion, increasing 8.1% compared to the beginning of the year. Deposits from customers increased by over 12%.
VIB’s NPL ratio decreased to 1.3%. With strict risk management, the bank has well maintained its risk indicators and prudential ratio. Capital adequacy ratio (CAR) according to Basel II is at 10.3%, the loan-to-deposit ratio is at 73.1%.
Answering investors’ questions about debt restructuring for customers affected by Covid-19, Mr. Hoang Linh shared that, since the beginning of 2020, more than 3,000 customers have had their debts restructured by the bank under Circular 01 and 03 of the State Bank (SBV), nearly 10,000 customers are entitled to a reduction in interest rates from 0.5 to 2 percentage points. Most recently, from July 15, 2021, VIB has continued to offer reduced lending interest rates for individual and corporate customers with an average interest rate reduction of 1.5 percentage points, focusing on customer groups severely affected by the pandemic.
VIB’s support was timely and effective so the outstanding balance of the restructured loans was paid in full and on time by most customers, helping the bank’s total restructuring loan balance decrease from time to time.
Key business segments excelled, bringing VIB to the top of the market in many fields
With a strategy to focus on retail, Ms. Tran Thu Huong shared VIB’s market-leading business segments, including mortgage loans such as real estate, automobiles, credit cards, and insurance.
After 5 years of transformation, VIB’s retail loan balance was in the Top 4 of joint-stock commercial banks by the end of 2020 and this position may have a positive change in 2021. The retail segment accounted for a proportion of 21% of profit before tax (PBT) of VIB in 2016, increased 6 times in terms of outstanding loans, and accounted for 70% of PBT of the whole bank by the end of 2020.
VIB Business strategies are gradually receiving positive results from the automation and digitization of sales and after-sales service in the retail segment.
Asked by analysts that as the leading bank in terms of auto loan market share for 5 consecutive years, whether VIB has difficulties in bad debt management and debt recovery, especially in the context of social distancing and the impact of the epidemic, Ms. Tran Thu Huong affirmed that VIB is not only the leading bank in terms of sales but also the industry leader in risk management of the Auto lending segment. VIB applies a strict risk appetite right from the product development stage and the customer’s debt repayment requirements, the Loan to value (LTV) ratio is always below 80%. The bank closely evaluates collateral, and at the same time applies selective lending: 90% of auto loans are new car loans for consumers and are concentrated in the top car brands in the market. Therefore, “With a tight risk appetite from the beginning, after 18 months since Covid-19 happened, the bad debt ratio of the retail segment in general and the auto segment in particular at VIB has almost remained unchanged,” said Ms. Huong.
The exchange of opinions also focused on VIB’s outstanding areas of bancassurance and credit cards. “The cake is huge for everyone to join in and do a good job. Vietnam’s bancassurance premium to GDP ratio is less than 1%, compared with an average of about 10% in other countries in the region. We love healthy competition, which helps the leaders become wiser and more efficient,” said Ms. Huong when investors asked about the current competitive situation of the bancassurance segment. VIB has ranked in the Top 1 and Top 2 for many consecutive years in bancassurance business. Despite social distancing, VIB has maintained its top bancassurance sales in recent years, thanks to digital sales platforms and digital solutions that have been implemented by VIB in the last two years.
About the credit card business, Ms. Huong shared that the bank’s credit card opening and card spending rates reached the highest levels in the history because VIB is a pioneer in applying modern technologies to daily life. From the opening stage to usage, it is completely online, besides other outstanding features that VIB applies in Vietnam. After more than 2 years of strict implementation in the credit card business, the bank has successfully applied artificial intelligence (AI) and big data processing (Big Data), along with modern technologies such as e-KYC, e -Signature in the credit card approval process, setting a new record for processing and approval period until the card is virtually used: only 15-30 minutes, equal to 1/500 average time in the market. As a result, VIB continues to be in the top position in terms of growth in the number of credit cards and spending on cards, and ranked second in the whole market, according to a report by the Vietnam Card Association.
“This confirms that our credit card development strategy is promoting our strengths in technology, unique product features, and the outstanding customer experience in the market,” Ms. Huong said confidently.
Some fund representatives questioned whether VIB would consider expanding its customer base through developing strategic partnerships with other companies, Ms. Huong said that VIB focuses on developing digital banking, with digital solutions to be able to reach a diverse set of customers instead of just targeting a few specific customer groups.
At the end of the exchange, VIB’s representative also expressed optimism and confidence in the policies of the SBV and the Government in both protecting the community against the pandemic and creating conditions for essential economic activities to be operated without interruption.
Pioneering in Digital Banking with high end technology, outstanding utilities and optimal security
VIB has been boasting a leading technology platform in the market. The bank has pioneered the application of leading technologies such as Big Data, AI, and cloud computing (Cloud) into transactions to make the online payment experience of customers easy and convenient in a short time. Mr. Tran Nhat Minh shared that customers can easily open cards for payment, account opening, online savings, money transfer… and other banking services of VIB 24/7 right at home without having to go to a branch. VIB’s digital banking achieved growth in registrations at 130% by 2020.
VIB also offers many 100% digital products and cooperates with partners such as Ho Chi Minh City securities company HSC and VNDirect securities company to help customers have a convenient experience. The bank’s CASA ratio is currently at 13% and there is much room for growth in the future, helping to maximize capital expenditure and expand NIM.
These factors help VIB become one of the top banks in terms of online transactions, with 91% of the total number of transactions.
Continuous and sustainable growth prospects
In the first six months of the year, VIB recorded a pre-tax profit of VND3,954 billion, up 68% over the same period last year. The bank’s capital adequacy ratio (CAR) following Basel II, is at 10.3%, the loan-to-deposit ratio is at 73.1%, and ROE reaches 32.9%, which helps VIB to be in the top 10 most effective banks in the industry for 10 consecutive quarters. VIB representatives said that the Bank believes that it will continue the outstanding achievements of the 10-year transformation program to maintain its leading positions in retail and technology in particular, and at the same time exceed its challenging business goals in 2021.
A replay version of the meeting is available here.