Facing difficulty in credit, banks seek "salvage" from service segment

Banks promote services to offset profits due to the Covid-19. Photo: ST

Do not let profits be affected

According to data from the State Bank (SBV), it is estimated that about VND926 trillion of debt is affected by the Covid-19 epidemic, about 14.27 percent of the total outstanding loans of 23 credit institutions.Meanwhile, according to a representative of BIDV, in the first two months, the Covid-19 epidemic affected the overall economy, causing falling bank deposits and lending compared to the end of the previous year. According to preliminary statistics of this bank, customers affected by the epidemic had outstanding loans of VND140,000 billion, approximately 13 percent of total outstanding loans. Similarly, Agribank also said its outstanding loans affected by the epidemic amounted toabout VND78,000 billion.

As well as the reduction in credit balance, bad debt and potential debt are at risk of increasing in banks. Therefore, banks plan to cutinterest rates, restructure the repayment term, and maintain the debt group to support affected customers and avoid the occurrence of bad debts.Besides, many banks such as Agribank, VietinBank, BIDV, Nam A, ACB, Techcombank, OCB and MBhave offered trillion-VND credit packages and low interest rates to remove difficulties for those affected by the Covid-19. These actions will bring benefits to the community and may be partly beneficial to banks, but they will impact on the profits of banks this year.

Although concerned about the impact of the Covid-19 epidemic, banks will have a solution to hit their 2020 profit targets.

Expand retail and services

To do this, besides trying to maintain efficiency of mobilisation and credit, banks have promoted retail and service segments such as bank insurance channel, providing finance, consulting financial and business solutions and revenue forforeign currency trading and cards.

The revenue structure of banks has been greatly improved in recent years. Ananalysis of 18 listed banks, accounting for 67.4 percent of Fiin Group's total outstanding loans, showed corporate and individual lending growth tended to decrease. Other activities including investment in securities trading (mainly Government bonds), foreign exchange and gold trading, and dividend income, grew by 5.4 percent in 2019.The profit growth of these 18 banks mainly came from improvement of net interest margin (NIM) at 30 basis points from 3.1 percent to 3.4 percent in 2018, with the major contribution from retail credit growth, including consumer finance in several banks through subsidiaries like VPBank, HDBank, MB and SHB recently.In particular, service fee collection of banks grew by 30.7 percent and the improvement came from three main banks namely VIB (144.6 percent), VPBank (84.2 percent) and TPBank (58.6 percent); three large State banks also experienced strong growth in service fees: VietinBank (46.5 percent), Vietcombank (26.6 percent) and BIDV (20.6 percent).

In addition, the report of Rong Viet Securities Joint Stock Company showed income from banking services would be expanded and be mainly promoted through selling insurance services via banks. Viecombank and ACB are forecasted to be the next banks with significant growth, as Vietcombank signed an exclusive agreement with FWD Life Insurance Company in November 2019; and ACB signed a non-exclusive contract with Manulife in September 2019 and with FWD in December 2019.This segment would play an important role recently because to support and encourage customers to increase use of online services and limit direct transactions, banks have exempted and reduced many fees and charges related to remittances.

To do this, experts said banks must strengthen their staff andservice development teams to continuously support customers. Because service revenue only uses the capacity of the employee, not capital, this is a way for them to have time to restructure their capital and revenue source.These actions will help the banking system do business well, while ensuring theyaccompany other ministries and branches in implementing policies to reduce taxes and fees for businesses and people facing difficulties due to the epidemic.