Credit collection contributes to lower and lower proportion of total banking activities

	Need to transfer capital faster and more conveniently to prevent black credit
	Property firms look to stocks for capital
	Credit growth in the next 3 years is forecasted at 14%

Credit collection contributes to lower proportion of total banking activities.

Service comes to the throne

Earlier this year, the State Bank of Vietnam (SBV) set a credit growth target of 17%, but then the target was dropped to about 15.5-16%. At the end of November, the SBV extended the room for credit growth only to some commercial banks with effective and positive business results in raising capital and handling bad debts. Typically, Techcombank was extended to 20% after settling all bad debts when they were sold to VAMC before. Most other banks are still limited by credit growth room. The analysts predict the 2 banks which will be extended credit growth room are VIB and Vietcombank in the coming time, because these are the two banks that have been recognized by the Governor of the State Bank for the Basel 2 standard.

According to Dr. Bui Quang Tin, Banking University of Ho Chi Minh City, the SBV tightened the credit growth, limited the credit in a number of risky areas such as real estate, securities investment... would affect profit growth of banks, Besides, the application of regulations on reducing the ratio of short-term capital for medium and long-term loans from the beginning of 2019 and the application of Basel 2 from the beginning of 2020 would make the revenue of banks fall. In that context, the banks have had to cut costs, boost retailing field and race to develop the service field in order to reduce dependence on credit.

In particular, the service revenue of banks comes from insurance cross-selling (bancassurance), the financial solutions such as derivative products, collection and payment on behalf, etc. In 2018, service revenue increased strongly in some big banks. In the small banks, due to low market share, the growth rate was lower, but the service still accounted for 15-20% of the total revenue of banks.

According to an analysis of Viet Dragon Securities Company (VDSC), HDBank's service income growth may reach 150% in 2018 and 70% in 2019. Similarly, MB's service income growth is also expected to achieve an increase of 80% in 2018 and 50% in 2019 thanks to income growth of insurance business. VDSC also forecasts that VietinBank's revenue from services will increase by 50% in 2018 and 25-30% per annum in the next 3 years thanks to the growth of service fees, bank cards, insurance, transaction fees and securities ... ACB, Vietcombank and BIDV banks are also having their own plans that can boost their contribution ratio, including upgrading the system and investing in digital banking

After all, in the short term, the service income will have good growth potential mainly due to the payment and insurance activities, but the growth rate may be different among the banks depending on their own advantages and strategies. In the long term, excluding extraordinary income, VDSC believes that the proportion of service income in operating income of banks would increase from 8.6% (estimated in 2018) to 10% in 2019 and 13.8% in 2022.

"The golden egg" is also affected

Dr. Bui Quang Tin said that according to the statistics at the end of November, "the golden eggs" FE Credit only contributed about 30% of VPBank's total operation, a significant decrease compared to nearly 50% in 2017. Similarly, contribution ratio of HD Saison financial company in HDBank also decreased from nearly 40% in 2017 to only 21% in 11 months of 2018.

According to Mr. Tin, the orientation on tightening the credit growth room would affect the lending activities of financial companies. In addition, the bad debt ratio of financial companies was not small. Besides, at the latest on January 1, 2020, the commercial banks must implement risk management and calculate the capital adequacy ratio according to Basel 2. “With pressure from both handling the bad debts and credit growth room being tightened, in all ways, the banks have to reduce risky lending activities. In particular, the three most risky lending activities are real estate lending, stock lending and loans of financial companies,” - Mr. Tin said.

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Even so, it is forecasted that the financial companies would continue to proliferate in the coming time. According to Mr. Tin, the reason is that the management of commercial banks was stricter than that of financial companies. The financial companies also meet the needs of customers better, disbursing time more quickly...