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Developing service associated with technology is the solution of OCB in the context of SBV tightening credit. Photo: ST

Promote services

According to experts, in 2019, the factors affecting the financial market are still very unpredictable, such as the US-China trade war, the monetary tightening policy of FED and many major central banks in the world. That context makes the deposit rate to be under pressure to increase in 2019, while the lending rates need to be kept low in the direction of the SBV and to ensure the bank's competitive advantage. Many organizations also forecasted that the banking industry's net interest income (NIM) ratio would decrease in 2019. In addition, according to the orientation of the State Bank, the credit growth in 2019 of the whole banking sector will continue to remain at about 14%. This has led many banks to continuously find a way to boost the collection of fees from payments, withdrawals or insurance services, financial advice instead of reducing dependence on credit.

In fact, reducing dependence on credit has become a trend in many banks since 2018. According to statistics of Rong Viet Securities Company in the 10 listed banks, including ACB, BIDV, VietinBank, MB, Vietcombank, TPBank, Techcombank, VIB,... in 2018, except Techcombank, the others had a decrease in the proportion of net interest income compared to operating income and an increase in the proportion of non-interest income. Specifically, the income from services grew strongest in TPBank (more than 300%), MB (more than 120%), mainly thanks to the promotion of insurance business.

In 2019, the growth of the income from service in these banks is expected to continuously reach the highest level in the industry. In addition, BIDV and Vietcombank are planning to divest from existing life insurance joint ventures to seek exclusive insurance distribution partners. If this is successful, the two banks will be able to gain extraordinary income from divestments and prepaid fees for the above contract. In addition, other income from the recovery of processed debts, foreign exchange and securities trading activities also grew strongly and contributed to expanding the proportion of non-interest income in total operating income of banks.

According to banks' leaders, revenue from service fees is not subject to credit risks. This means that the bank will have to make provisions for bad debts and not have to worry about bad debts and debt collection. Therefore, the growth of the income from service is considered sustainable growth and is the trend of most banks nowadays.

Mr. Nguyen Dinh Tung, General Director of OCB Bank, said that OCB always supported the policy of reducing credit growth that the State Bank is applying. With this policy, banks must take appropriate steps to achieve their business goals. Specifically, in 2018, OCB had a credit growth of about 19% as permitted by the State Bank. Besides, the bank also increased its revenue by arranging domestic and foreign capital, arranging bond issuance and raising capital for some businesses that are customers of OCB. The growth of the above products compared to the OCB's credit growth was also about 6-7% including corporate bonds, private placement of shares for strategic investors, and M&A of enterprises.

Mr. Tung predicted that in the next 10 years, the prospect of credit growth of over 20% would definitely no longer exist and each bank must adjust its target to have an appropriate growth rate, which was to expand market share by payment services, capital arrangement and derivative services in the future if they were permitted by the State Bank.

Take advantage of the technology

Along with the development of services, digitization is becoming a preferred strategy for banks to minimize traditional costs. In fact, commercial banks not only compete with each other but also compete with technology companies operating in the banking sector (payment services, lending services ...). This not only pressures on reducing the profitability and growth of banks but also requires the bank itself to constantly change and update new technologies and services to serve customers’ diverse needs. Mr. Tung said, 5 years ago, OCB prepared a risk management system and completed the infrastructure for Basel 2 two years ago (1 year earlier than the time when the State Bank recognized it).

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Mr. Pham Manh Thang, Deputy General Director of Vietcombank also shared that the credit growth target of Vietcombank this year was 14%, 1% lower than in 2018. For banks, the number of 1% was also very big, so in order to achieve the business growth target in 2019, the bank would boost digital banking and shift from wholesale and retail. “Vietcombank will boost lending through technology, not just on traditional lending products, but also to manage and apply information technology to banking products. Accordingly, Vietcombank will establish more traditional and technology transaction points (digital bank). The VCB's digital banking project will soon go into operation and will bring benefits to banks and customers”- said Mr. Thang.