Saturday, 08 May 2021

Vietcombank maintains resiliency through high profitability and stable asset quality

Interviewed By Editorial

Vietcombank topped the ranking of Strongest Banks by Balance Sheet in Vietnam in 2020. Vietcombank and other banks were recognised at the Strongest Banks by Balance Sheet Briefing and Recognition Virtual Ceremony 2020 presented by The Asian Banker.

Vietcombank topped the ranking of Strongest Banks by Balance Sheet in Vietnam in 2020. Vietcombank and other banks were recognised at the Strongest Banks by Balance Sheet Briefing and Recognition Virtual Ceremony 2020 presented by The Asian Banker.

This is the most comprehensive annual evaluation that captures the quality and sustainability of the balance sheets of banks in the Asia Pacific (APAC), Middle East, and Africa regions.

The ranking is based on a detailed and transparent scorecard that evaluates commercial banks and financial holding companies (banks) in six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity. For Strongest Banks by Balance Sheet 2020, the financial information in the first half of 2020 (1H 2020) was collated and incorporated into the assessment of how banks performed during the COVID-19 pandemic.

Vietcombank tops ranking of strongest banks by balance sheet in Vietnam

The bank demonstrated strong asset quality as its gross non-performing loan (NPL) ratio dropped to 0.8% in 1H 2020 from 1% a year earlier and loan loss reserves (LLR) to gross non-performing loans ratio increased to 254% from 177%. Its profitability remained high as reflected by the return on assets (ROA) of 1.5% and cost to income ratio of 35%. In addition, it posted steady balance sheet growth while maintaining relatively ample liquidity.

Le Hoang Tung, chief accountant officer at Vietcombank, in his acceptance speech said, “Our bank will further restructure our business and optimise our abilities to ensure sustainable growth and maintain the number one banking position in Vietnam”.

The following were especially considered in the evaluation of the banks’ balance sheet strength and resilience: how accelerated digitalisation are enhancing bank balance sheet strength, the impact of debt moratoria, rescheduling and financial aid measures introduced by regulators on bank asset quality, how banks are growing alternative sources of income amid the record low interest rate, and the strategic economic relief and regulatory support in response to the crisis and effect on the pace and scale of recovery.

The bank achieved solid results in profitability 

Vietcombank ranked first in Vietnam and placed 55th out of 500 in the Strongest Bank by Balance Sheet ranking in APAC. Its strength score stood at 3.34 out of 5, compared to the weighted average strength score of the 22 Vietnamese banks on the list at 2.64. Agribank and BIDV, the top two largest banks by total assets in the country, placed 238th and 278th in the region, respectively.

Despite the negative impact of the pandemic, the profitability of Vietcombank remained relatively high. The bank still posted a 2.5% increase in the pre-impairment operating profit while the pre-impairment operating profit of Agribank and BIDV dropped by 16% and 3%, respectively.

The ROA of Vietcombank fell from 1.67% in 1H 2019 to 1.5% in 1H 2020 which is still much higher than the industry average ratio of 1.1%. Its cost to income ratio improved to 35%, compared to the industry average ratio of 42.4%. 

Asset quality remained strong due to prudent credit risk management

The gross NPL ratio of Vietcombank improved from 1% in 1H 2019 to 0.8% in 1H 2020, much lower than the industry average ratio of 1.7%. Only Sai Gon Commercial Bank, Asia Commercial Bank, and Bac A Commercial Bank recorded slightly lower gross NPL ratio than Vietcombank. The gross NPL ratio of Techcombank, the second strongest bank in the country, stood at 0.91%.  Agribank and BIDV had a much higher gross NPL ratio at 2.2% and 2.0%, respectively.

Meanwhile, Vietcombank increased its LLR to gross non-performing loans ratio from 177% to 254%, the highest among its peers in the country. The weighted average LLR to gross non-performing loans ratio of the 22 Vietnamese banks was 109%.

For the evaluation criteria and full ranking list of Strongest Banks click here

About the programme

The Asian Banker Strongest Banks by Balance Sheet is an annual assessment of the financial and business performance of the banking industry in the Asia Pacific, Middle East, and Africa regions. The assessment ranks the top performing banks in each country by strength, an evaluation that is based on a belief that a strong bank demonstrates long-term profitability from its core businesses.

The scope and coverage for The Asian Banker Strongest Banks by Balance Sheet come from both the mature markets and the most promising emerging markets in the regions. The focus of the assessment is on commercial banks and financial holding companies with a significant proportion of activity in commercial banking. The assessment does not include central banks, policy banks or finance companies.

 

 


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