Large growth potential for Vietnam banking services in long-term

Many listed banks witnessed weak performance of fee income growth in the first six months of the year due to the Covid-19 pandemic.

Payment fees and card fees are expected to maintain growth momentum upon the promotion of non-cash payment, as banks are focusing on the retail segment and digital transformation, according to Viet Dragon Securities Company (VDSC).

Additionally, bancassurance fees should continue to see solid growth upon stronger penetration of insurance and the contribution of banca channel on total insurance premiums (especially life-insurance), while fee income structure can also be diversified with other activities such as bank guarantee, bond services and brokerage, stated VDSC in its latest report.

During the first half of 2020, many listed banks witnessed weak performance of fee income growth, which stayed at only 9.9% year-on-year, significantly lower than the growth rate of 42.1% in the same period of last year.

It is worth mentioning that fee income contributed to 10.6% of banks’ operating income during the period.

The main reasons for the a lower growth rate was due to (1) weak credit demand caused by the Covid-19 pandemic, which had hampered banking services, particularly insurance, trade service and FX gains, (2) net payment fee slowdown upon tariff discount, and (3) the decline in customer traffic over counters. Another contributor to this short-term trend could be the transfer in booking of some credit card fees (from fee income to interest income) in some banks since the beginning of this year.

Card and payment fees

Total number of cards in circulation and total number of bank accounts have seen an upward trend in recent years, yet the growth rate is leveling off, added VDSC.

According to Vietnam Bank Card Association statistics, total number of cards in circulation at 2019 was nearly 103 million, of which, 91 million are debit cards (88.7%), 7 million are prepaid cards (6.5%) and 5 million are credit cards (4.7%).

 

The card market share is still dominated by state-owned banks. Several private banks are also focusing on promoting new card issuance to gain more market share, including Techcombank, ACB, VPBank, Vietnam Maritime Bank and TPBank. It's noteworthy that actual efficiency (transaction value against number of issued cards) tends to be higher in retail-oriented banks such as Vietcombank, ACB, VIB and TPBank.

Besides, the trend of non-cash payment also facilitated a constant upward trend in domestic payment through bank cards, transfer and direct debit both in terms of transaction value and volume. These would be growth engines for payment and card fees, traditionally being the two most popular fee income sources.

Bancassurance service

According to Insurance Association of Vietnam (IAV), total bancassurance premiums in the January – June period reached VND55.95 trillion (US$2.42 billion), up 19% year-on-year. This growth rate is well lower than the 25-32% year-on-year in the latest seven consecutive years, which can be traced back to the impact of Covid-19 and the strategic shift in many leading insurance companies, stated VDSC.

It should be noted that banca channel has become more important in the distribution of life sector as it contributed 29% to total new fee in 2019, a sharp rise from 10% in 2016. As such, overall VDSC expected bancasurance activity to maintain its growth momentum and become the main driver for banks’ service fee in upcoming period.

Techcombank, VIB and Military Bank are currently leading the banca market, yet it is expected the share to be redistributed between players upon more active penetration of some large banks. The expansion trend can be seen clearly at VIB, Sacombank, ACB and VPBank. Especially, Vietcombank and ACB are likely to achieve higher banca market share owing to their newly signed distribution agreements. Hanoitimes

Nhat Minh

Vietnamese banking system sees big changes

Vietnamese banking system sees big changes

Private banks that can satisfy the requirements on capital adequacy ratio (CAR) now have great opportunities to obtain bigger market share.

 
 

Other News

.
China resumes importing Vietnamese dragon fruit, bananas
China resumes importing Vietnamese dragon fruit, bananas
BUSINESSicon  10/09/2021 

China has agreed to resume importing Vietnamese dragon fruit and bananas through the Kim Thanh International Border Gate in Lao Cai province following a hiatus due to COVID-19.

Digital transformation to increase productivity: the only way to not lag behind
Digital transformation to increase productivity: the only way to not lag behind
FEATUREicon  10/09/2021 

At Garment 10 Company, productivity increased exponentially after new technologies and digitalization of the production line were applied.

Welcoming visitors with "vaccine passports"
Welcoming visitors with "vaccine passports"
FEATUREicon  10/09/2021 

Van Don international airport in Quang Ninh province was selected to welcome the first visitors with a "vaccine passport" on September 4. 

Vietnamese households to spend more on food
Vietnamese households to spend more on food
BUSINESSicon  10/09/2021 

The average Vietnamese household will spend 20.8 per cent of their total household budget on food in 2025, marginally increasing from 20.1 per cent in 2005, according to global financial services provider Fitch Solutions.

Two out of five Vietnamese consumers will abandon long online banking account applications
Two out of five Vietnamese consumers will abandon long online banking account applications
BUSINESSicon  10/09/2021 

Vietnamese consumers expect a seamless banking experience when it comes to opening an account via a mobile app or website, with two in five expecting to answer 10 questions or less or they will abandon the process.

NA Deputy warns of property bubbles
NA Deputy warns of property bubbles
BUSINESSicon  10/09/2021 

State Bank of Vietnam Governor Nguyen Thi Hong has sent a document replying to Ha Sy Dong, a National Assembly Deputy from the central province of Quang Tri, who spoke about property bubbles at the first session of the 15th NA on July 25.

Hanoi enterprises resume operation, but with high caution
Hanoi enterprises resume operation, but with high caution
FEATUREicon  10/09/2021 

The enterprises in yellow and green zones of Hanoi have been asked to continue anti-pandemic measures during the production process. The ‘three on the site’ model (work, eat, stay) is being used in high-risk zones.

Garment-textile, footwear may take long time to recover: insiders
Garment-textile, footwear may take long time to recover: insiders
BUSINESSicon  10/09/2021 

Viet Nam’s garment-textile and footwear sectors have endured the brunt of COVID-19 and firms may take a long time to recover, experts said.

VN industrial, logistics real estate a resilient asset class: analysts
VN industrial, logistics real estate a resilient asset class: analysts
BUSINESSicon  09/09/2021 

Demand for e-commerce and pharmaceuticals ensure that the industrial and logistics real estate segments remain the most resilient asset class in 2021, experts have said.

VIETNAM BUSINESS NEWS SEPTEMBER 10
VIETNAM BUSINESS NEWS SEPTEMBER 10
BUSINESSicon  10/09/2021 

VN-Index bounces back on blue chip recovery

Vietnam to issue a tax decree on cross-border e-commerce
Vietnam to issue a tax decree on cross-border e-commerce
BUSINESSicon  09/09/2021 

Vietnam intends to issue a new decree to regulate cross-border e-commerce deliveries amidst the e-commerce boom.

State Bank agrees to extend debt rescheduling for six months
State Bank agrees to extend debt rescheduling for six months
BUSINESSicon  09/09/2021 

The State Bank of Vietnam (SBV) has agreed to extend debt rescheduling for customers for a further six months.

Sticking points impeding rice trade
Sticking points impeding rice trade
BUSINESSicon  11/09/2021 

Although the Vietnamese rice industry has set itself an ambitious export target for 2021, domestic rice farmers and suppliers remain cautious amid the ongoing health crisis and complications in international trade.

VIETNAM BUSINESS NEWS SEPTEMBER 9
VIETNAM BUSINESS NEWS SEPTEMBER 9
BUSINESSicon  09/09/2021 

Wood exports plummet as amid virus outbreak

Food prices in Vietnam the cheapest in Southeast Asia
Food prices in Vietnam the cheapest in Southeast Asia
BUSINESSicon  09/09/2021 

According to a report by iPrice, grocery prices in Vietnam are among the cheapest in Southeast Asia after comparing prices for groceries in Southeast Asia from Numbeo.

Plans afoot to push production ahead
Plans afoot to push production ahead
BUSINESSicon  08/09/2021 

Domestic production has been hit hard this year, with numerous enterprises facing greater woes and leaving the market. However, the situation could be eased by a new special taskforce established by the prime minister.

Longer-term FDI strategy in need of situational tweaks
Longer-term FDI strategy in need of situational tweaks
BUSINESSicon  09/09/2021 

The pandemic is forcing a number of factories to either stop operations or pare down capacity, which has increased pessimism about the short-term outlook of Vietnam’s business environment.

Businesses in green zones resume operation
Businesses in green zones resume operation
FEATUREicon  09/09/2021 

With control loosening, businesses in green zones in Hanoi will be able to restart their production and business activities. But they fear that control may tighten again if the outbreak gets worse.

Jan-Aug period sees 24 wind power plants commissioned
Jan-Aug period sees 24 wind power plants commissioned
BUSINESSicon  08/09/2021 

Twenty-four wind power plants with a combined capacity of 963 MW began commercial operations in the year to August, according to the Vietnam Electricity Group (EVN).

Driving force needed for economic recovery in HCMC after Covid-19 pandemic
Driving force needed for economic recovery in HCMC after Covid-19 pandemic
BUSINESSicon  09/09/2021 

A research team from the University of Economics and Law under the National University of Ho Chi Minh City, on September 6, announced the result on the topic "Creating the driving force for economic recovery in HCMC in the fourth wave of Covid-19".

 
 
 
Leave your comment on an article

OR QUICK LOGIN