Banks increase non-interest revenue

	Continue to handle cross-ownership in banks
	Exchange rate fluctuations bring huge profits to many banks

Many banks have diversified their revenue sources and promoted cross-selling of products and services. Photo: LPBank

Many pressures on revenue

In the first 9 months of 2024, the group of banks leading in profit has focused on increasing the ratio of non-term deposits (CASA) to help reduce operating costs, resulting in positive credit growth. The group of medium and small-sized banks has also reduced operating costs, increased non-interest income from expanding and diversifying products and services, meeting customer requirements...

However, there are also many banks having a decline in profits. The main reason is low credit growth, along with insufficient revenue from services.

In general, from the financial statements of 29 banks in the first 9 months of 2024, total net interest income reached more than VND 378.7 trillion, an increase of 15.8% compared to the first 9 months of 2023. 25/29 banks recorded an increase in total income of net interest in the past 9 months. Regarding net interest from service activities, the financial statements of 29 banks recorded more than VND 46.7 trillion, a slight increase of 3% compared to the same period last year. Net interest from services contributed about 10% to the total operating income of banks.

The above figures show that net interest income is more than 8 times higher than service income. Moreover, from the end of 2023, the service segment will no longer contribute significantly to banks' non-interest income because major service revenue sources such as insurance, bond insurance guarantee... are all facing difficulties.

The recent Banking Industry Update Report by SSI Securities Company (SSI Research) shows that credit demand is still slow and fragmented, forcing banks to apply many preferential loan packages with low interest rates. Moreover, fierce competition among banks makes it difficult to increase lending interest rates while deposit interest rates are gradually increasing.

In addition, bank profits were also affected by the lack of improvement in other business activities, with net fee income decreasing by 18.6% compared to the previous quarter. Income from foreign exchange and securities trading activities weakened in the third quarter of 2024, decreasing by 54.4% compared to the second quarter of 2024.

Calculating to increase non-interest revenue

Despite external pressure and difficulties, considering each bank, some banks still have strong growth in non-interest income, becoming a bright spot in overall business results. Many banks are making efforts to boost non-interest income through digital transformation.

LPBank is the bank that recorded the strongest increase in service income, more than 4 times higher than the same period from VND 640 billion to VND 2,701 billion. According to LPBank, this result is thanks to diversifying revenue sources, promoting cross-selling of products and services such as foreign currency trading services, remittances, import-export, money transfer… helping the proportion of non-credit income to total income increase significantly from 13.98% to 23.64%.

NCB also reported net profit from services nearly 3 times higher than the same period last year, reaching VND 63 billion. According to NCB, from 2023 to present, NCB has invested heavily in infrastructure and technology solutions. In particular, in 2024, NCB cooperated with the world's leading technology partners to implement highly complex digital transformation projects. As of September 30, 2024, NCB has reached a scale of more than 1.24 million customers, equal to 160% of the annual plan and a growth of 24.22% compared to the end of 2023.

SSI Research's report forecasts that the profit margins of banks in the fourth quarter of 2024 will still face pressure and continue to narrow in the last 3 months of the year. Moreover, the market still has some potential credit risks related to loans for buying house, real estate investors and the renewable energy industry. However, SSI Research estimates that the growth in pre-tax profit of the whole industry will reach 14.5% in the fourth quarter of 2024 and reach 13.3% for the whole year of 2024.

This growth will be further contributed to when the banking system's non-interest income increases sharply due to objective factors. For example, according to analysis by experts from VPBankS Securities Company, the State Bank's regulation allowing banks to cross-sell investment-linked insurance products will come into effect, helping to unblock the insurance market, thus, fee income from insurance-banking linkage activities will recover. In addition, income from bad debt settlement is also expected to be more positive than the same period, which will contribute more to the banks' non-interest income.

Therefore, experts and banks believe that it is necessary to continue calculating to increase non-interest income with many solutions, in which, management agencies should have support to promote banks in digital transformance to increase competitiveness and attract users.