The five-year restructuring process has created a strong distinction in the asset size of Vietnam’s banks by mid-2017. Five of them, namely Military Bank (MB), Asia Commercial Bank (ACB), Saigon – Hanoi Commercial Joint Stock Bank (SHB), Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) and Vietnam Technological and Commercial Joint- stock Bank (Techcombank), have closely followed each other.
Although the banks have not admitted, over the years, they have been in a race. Among them, VPBank stands out as a new star not only in terms of size but also in performance.
Commercial real estate lending
Techcombank’s total assets unexpectedly decreased in the first half of 2017. This resulted from the reduction in its real estate lending from 17% of the total outstanding loans (estimated at roughly US$1 billion by the end of 2016) to 24.6% (about US$793 million currently). The last time the bank suffered a property loss was in 2013 with ACB.
Another bank also reducing the ratio of real estate lending in its total outstanding loans is VPBank. Last year, the bank recorded only 12.3% of real estate loans (roughly US$793 million) compared with 16.3% of the year 2015.
Both banks have lent heavily to real estate in the past. To be more specific, in 2014, the real estate loan ratio of VPBank was 28.6% of its total outstanding loans and Techcombank’s ratio was 20%. Apart from direct loans, Techcombank is also holding a large number of bonds issued by real estate companies (Vingroup, Novaland...)
While ACB has been quiet in the real estate lending market, MB and SHB have from 4% to 6% of their market share in real estate credit. However, both of them have large construction loans, respectively 9.4% and 14% of their total loans in 2016.
FE Credit, a consumer finance company, which contributed VND2,000 billion (roughly US$88.1 million) to VPBank last year, has become a big help for the listing of this bank with a higher price than most other banks.
FE Credit is the driving force for VPBank to enter the race of the five banks.
The booming of consumer lending with attractive profit has triggered other banks. In late 2016, MBBank coordinated with Shinsei Bank (Japan) to introduce MCredit with the ambition to dominate the market share of FE Credit and Home Credit, HD Saison, Prudential Finance.
Techcombank also bought a financial company in 2015 and renamed it TechcomFinance, but it has no noticeable activity. Currently, personal loans account for 45% of total outstanding loans of the bank, which has remarkably increased from 32% in 2013.
Every bank is seeking a way to enhance its position in the retail banking market, but the fact is that ACB had established itself as the leader in this segment before its 2012 incident.
In recent years, ACB is regaining its position. Its personal lending ratio was 53% in 2016, increasing from 35% in 2011. After opening five branches in 2016, the bank planned to open from 3 to 5 branches each next year and expanding the credit size for individual customers and small – medium enterprises.
In 2012, small-scale Habubank has merged with SHB to raise the scale to VND100 trillion (about US$4.4 billion). Since then, the total assets of SHB have increased by more than US$6.6 billion to join the race.
However, compared to four other banks, SHB's efficiency ratio is the lowest. For the past five years, SHB's return on assets (ROA) was 0.4% while one of MB was 1.3% and one of VPBank was 1.1% (ROA of five banks was averagely 0.8%).
SHB's profit has always been the lowest in the past three years compared to the rest of the group. It also has slow growth rate. Last year, MB, VPBank and Techcombank made profits many times more than SHB.
In contrast to SHB, MB has maintained an impressive profitability for many years, especially during the period 2012 - 2014. In just the past two years, the strong rise of VPBank and Techcombank has outshone MB regarding profitability in this group.