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These banks are now facing stiff competition by a number of large scale private commercial joint stock banks, which have since 2018, stepped up and are continuing to accelerate their pace. 

Competitive edge

According to financial reports of commercial banks, the top ten commercial banks with the highest profit before tax (PBT) are as follows: Vietcombank with VND 27,376 bn; Techcombank with VND 23,238 bn; VietinBank with VND 17,598 bn; MB Bank with VND 16,257 bn; VPBank with VND 14,584 bn; Agribank with VND 14,000 bn; BIDV with VND 13,602 bn; ACB with VND 11,998 bn; HDBank with VND 8,070 bn; and VIB with VND 8,011 bn.

Looking at these statistics, it can be seen that the number of banks joining the EBT club of over VND 10,000 bn is increasing. In 2018, when only two banks were in this group, if a bank profit before tax was VND 10,000 bn it was considered huge, now this number has increased four times with eight banks. However, the two banks holding the first and second position are still holding a profit before tax of more than VND 20,000 bn.

Since 2017, Vietcombank, BIDV, and VietinBank have alternately held the lead position in profit ranking, but from 2018 up until now, only Vietcombank has held on to its No. 1 position. Other state-owned commercial banks are increasingly being gradually eclipsed. In other words, the profit ranking is being overtaken by a group of private joint-stock commercial banks.

In 2021, Techcombank rose to second place, recording a total operating income of VND 37,100 bn, in which income from interest reached VND 26,700 bn, up 42.7 percent over the same period last year, and Net Interest Margin (NIM) was 5.6 percent, compared to 4.9 percent in 2020. Income from service activities also increased by 42.4 percent, reaching VND 7,800 bn. Techcombank recorded a growth in pre-tax profit of 47.1 percent, from VND 15,800 bn in 2020 to VND 23,238 bn in 2021.

Although VietinBank remained in third position, the increase in EBT compared to 2020 is not much, only 2.7 percent, from VND 17,120 bn in 2020 to VND 17,589 bn in 2021. Following closely is MB Bank at fourth place because of high profit growth of upto 52.1 percent, from VND 10,688 bn in 2020 to VND 16,257 bn in 2021. The next position in the top five also does not belong to the remaining state-owned commercial banks, because VPBank has contributed to acceleration of the private group in ranking.

BIDV has been pushed back from second position to seventh place, behind even Agribank, which is at sixth place, although its profit before tax in 2021 has increased by 50.7 percent compared to 2020. In any case, the banks that were lagging behind are now moving forward at a fast pace. ACB has joined the club with a profit of over VND 10,000 bn and is closely following BIDV. The other two banks, HDBank and VIB, have increased EBT by more than 38  percent last year to more than VND 8,000 bn now. With the current growth momentum, the last three banks in the top ten are likely to threaten BIDV in the near future, to gain in ranking. 

Fierce competition

All the banks will inevitably face fierce completion and see a drop in ranking. However, large scale joint stock commercial banks have the advantage of development space over state-owned commercial banks, when they can actively decide on their own internal issues to grow their customer base and increase business activities. For instance, increasing charter capital and increasing the Capital Adequacy Ratio (CAR) to meet Basel II will help private banks to develop credit activities. In recent years, the stock market has rallied for the requirement of paying dividends in shares, and many banks have increased capital strongly.

Besides, the CAR ratio has been raised, and the credit limit granted by the State Bank of Vietnam is also higher. In 2021, Techcombank recorded a 22.1 percent increase in credit compared to the end of 2020, according to the credit limit granted by the State Bank of Vietnam. Last year, MB Bank also recorded a 22 percent increase in outstanding loans to customers.

Commercial banks with state capital that want to increase capital must wait for the National Assembly and the Government to consider and decide. Despite approving the sale of capital and receiving dividends in shares, the amount of capital increased is still very small. BIDV leaders shared that despite being approved to pay a dividend of 25.77 percent to increase capital, the bank CAR is still low.

Adding up the outstanding loans, customer support debt structure, and the requirements for Basel II and Basel III, the pressure on banks with CAR is increasing. Credit growth, as well as profit growth of these banks, were both affected by low CAR. These banks have to take other compensatory measures such as issuing secondary bonds, increasing medium and long-term deposits, increasing the cost of capital, while having to lend at lower interest rates than the general average. At the same time, they must actively implement policy credit programs and offer support according to the State Bank of Vietnam criterion.

State-owned banks have lost their position in the service sector, especially in digital banking because of limited competitiveness in the credit sector. Therefore, in early 2022, some banks had to free all services on digital banking to attract customers, which has been applied by Techcombank, MB Bank, and VPBank for a long time. With this policy, Techcombank attracted about 1.2 mn new customers in 2021, bringing the total number of customers to 9.6 mn. The volume and value of individual customer electronic transactions in 2021 reached 652 mn transactions at VND 9.100.000 bn. This was up by 70 percent in transactions over the same period in 2020.

MB Bank also recorded about 6.3 mn new users in 2021, cumulatively reaching 9.5 mn users, an increase of 320 percent compared to 2020. Similarly, VPBank is also in the lead group in terms of number of customers because of comprehensive digitization on many transaction platforms.

Source: Sai Gon Giai Phong

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