In the first nine months of the year, the Vietcombank’s pre-tax profit exceeded the full-year 2017 figure and closed in on the year’s target.
Thanks to a decline in provisioning for risky loans from 36.2 per cent to 29.9 per cent, the profit surged by 47 per cent year-on-year to US$516 million. Thien Ly reports on VNS.
Notably, its net profit from services was up 34 per cent. The bank executive said profits from non-credit activities increased sharply and contributed 30 per cent of the profits.
In addition, the lender’s investments became more selective, focusing on effective products, the executive said.
Military Bank had also reported a very impressive performance in the first three quarters with pre-tax profits doubling year-on-year to VND6 trillion. Services accounted for VND1.69 trillion, half of which came from bancassurance, which rose by 3.2 times.
In recent years, Techcombank has also pursued a policy of diversifying its income sources to reduce reliance on income from credit activities and fee collection while also reducing risks at the same time.
As a result, the profits the bank earned from insurance services accounted for 26 per cent of its total profits from non-credit activities.
Not only big banks but also many small banks have managed to increase the share of their profits from activities other than lending.
VietBank for instance invested $14 million in core banking to shift from providing only credit services to non-credit services.
Core (centralised online real-time exchange) banking refers to networking a bank’s branches enabling customers to access their accounts and perform basic transactions from any branch.
In the past, VietBank’s revenues from non-credit services accounted for only 3 per cent, but they are expected to reach 10 per cent this year and 20 per cent by 2020.
Experts said however the main source of income outside of credit activities is from service fees.
Many banks wanted to increase the fees for many of their services to improve revenues from this segment but the Central Bank of Vietnam shot down the plan.
Bankers said however that they increased fees so that they can afford to develop infrastructure and maintain ATMs.
Experts said banks should focus on offering products and services with financial solutions to collect fees instead of increasing fees for services such as ATM cash withdrawals and mobile banking.