Vietnam's best domestic bank 2020: Vietcombank
If any financial institution traces Vietnam’s phoenix-like surge from the devastation of war to economic exemplar, it’s the Joint Stock Commercial Bank for Foreign Trade of Vietnam, or Vietcombank. Founded in Hanoi in 1963, just as the ‘American war’ was heating up, the bank began its journey as a currency-exchange operation.
By 1990, Vietcombank had morphed into a mass-market commercial bank, riding a fast-growth economy destined to join the ranks of the Asian tigers. In 2008, the government entrusted the bank to lead the charge toward privatizing state-owned enterprises across sectors. A year later, it listed on the Ho Chi Minh City Stock Exchange, the biggest initial public offering at the time, with great fanfare.
Today, it is Vietnam’s largest commercial bank by market capitalization. And in a decidedly difficult 2019, when trade-war chaos led to China having its slowest growth in 30 years, Vietcombank reported a pre-tax profit of about $1 billion, up 27% from the previous year – and 116% of what it promised to deliver to shareholders. Total assets rose 13.8% year on year, to 102% of the bank’s target.
Credit growth, particularly in the high-margin retail lending space, was a brisk 15.9% year on year. Retail and corporate loans accounted for 52% and 48% of the loan book respectively, against 46% and 54% in 2018. Deposits jumped 15.9% year on year in 2019.
Asset quality ended 2019 on a high note, too. The bank’s non-performing loan ratio dropped for the sixth year in a row. Loan loss reserve coverage hit 182%, the highest among commercial banks in Vietnam. Vietcombank’s capital adequacy ratio ended 2019 at 9.6%, well above the 8% required by the central bank.
These figures pre-date the Covid-19 crisis of course. As with most of Vietnam’s big state-owned banks, global fallout from the pandemic made for a rough first quarter. Vietcombank’s pre-tax profit fell 11% year on year as management boosted credit-risk reserves. In April, State Bank of Vietnam governor Le Minh Hung said Vietnam’s financial system is bracing for a big increase in bad loans.
The good news, though, and the reason Vietcombank walks away with Asiamoney’s best domestic bank award, is that it entered 2020 on a solid footing relative to peers – and with a greater cushion to push on with plans to expand its branch and transaction-office network, opening representative offices in the US and Australia while its digital transformation is turning heads at home.
Vietcombank seems well positioned to help the national government continue raising its competitive game on infrastructure projects, leading debt issues to expand the economy, shepherding new IPOs to market and providing financing for the wave of “tech” unicorns that investors crave from a southeast Asian economy very much on the move.