40 slides from Vietnam Technological & Commercial Joint Stock Bank's earnings presentation, July 2018
Slide 1: Analyst Presentation: Strategy and 1H2018 Review
ANALYST PRESENTATION STRATEGY AND 1H2018 REVIEW Hanoi, July 2018
Slide 2: #1 Joint stock bank in Vietnam
#1 Joint stock bank (“JSB”) in Vietnam: Largest and top performing JSB(1)(2) Largest JSB by total operating income (“TOI”) Highest return on average assets (“ROAA”) of 3.2% among all Vietnamese banks(3) Lowest cost-to-income ratio of 27.9% among JSBs Highest TOI per employee of VND2.1Bn among JSBs L
Slide 3: Simple to understand and execute strategy
Simple to understand and execute strategy Our one page strategy contains all elements of our three phase transformation: Customer centricity Foundational excellence Performance management Clear and simple enough for all 8,500 employees to know, understand, and execute Easy to measure success targets
Slide 4: We staged our initiatives to drive the transformation of Vietnam's financial services industry
We staged our initiatives to drive the transformation of Vietnam’s financial services industry ACCELERATE Performance Management UPGRADE Foundations and Infrastructure BUILD People and Organizational Capabilities Return on risk weighted assets management BU – IT transformation Acceleration on
Slide 5: We are organized to better serve our customers
We are organized to better serve our customers… Organization redesigned in alignment TCB with strategic direction: Customer segment divisions to lead all efforts Product/Solution divisions Customer Segments Solutions Services Support to develop and deliver the best experience to customer Wholesale B
Slide 6: …consequently, we outperform our targets
…consequently, we outperform our targets Our strategy is in Drivers Completion ratio place 2016 2017 1H2018 Gross loans 103% 96% 99% We are very Total deposits 101% 75% 92% disciplined on Total equity 105% 106% 102% Balance execution sheet Total assets 106% 97% 108% CASA ratio 119% 112% 107% We have
Slide 7: We are growing according to our 5-year strategic plans across key metrics
We are growing according to our 5-year strategic plans across key metrics... ASSETS LOANS DEPOSITS VND Tn VND Tn VND Tn +10% +20% +18% 300.4 166.7 186.3 160.8 173.4 171.0 269.4 142.6 235.3 142.2 191.9 112.2 29% 26% 8% YoY YoY YoY 2015 2016 2017 1H2018 2015 2016 2017 1H2018 2015 2016 2017 1H2018 Cont
Slide 8: The trend continues in all business and customer segments in 1H2018
... and the trend continues in all business and customer segments in 1H2018 Techcombank’s loan growth of 26% outpaces the market YoY credit risk provision is ~40% of 1H2017 as a result of continued improvements in portfolio credit quality and full write-off of legacy bad debt Business is well positi
Slide 9: Leveraging favorable macro-economic conditions
Leveraging favorable macro-economic conditions VIETNAM’S GDP GROWTH(1) TOTAL BANKING LOANS(2) LARGE CORPORATE BORROWING(3) USD Bn USD Bn USD Bn +8% +22% 224 +18% 289 103 205 193 245 93 207 69 33% 38% 36% 33% 2015 2016 2017 2015 2016 2017 2015 2016 2017 % of Large corporate borrowing vs. Total bankin
Slide 10: Redesigned WB business model aligns the entire bank behind a value chain approach
Redesigned WB business model aligns the entire bank behind a value chain approach Focus economic sectors Travel and Utilities & Financial Real estate Retail Auto leisure telecom institutions Capture value chain customers Provide one-stop solutions Short-term financing; transaction banking BB Payroll
Slide 11: Superior economics derived through value chain approach
Superior economics derived through value chain approach Focus economic sectors Travel and Utilities & Financial Real estate Retail Auto telecom leisure institutions Loan disbursement by TCB Cash flow within the value chain Cash Loan repayment to TCB 2 1 7 3 remains 6 8 within the TCB Suppliers Devel
Slide 12: Opportunity for future growth within our existing customer base
Opportunity for future growth within our existing customer base WB LOANS Healthy growth in Wholesale Banking loan book over VND Tn 45% the past three years; driven by our marquee corporate YoY customers: ~ 4% of VVIP customers account for 55% +30% 75.0 77.0 of the loan book and 55% of total Wholesal
Slide 13: Shift portfolio mix to serve our largest corporate customers
Shift portfolio mix to serve our largest corporate customers… Large Corporate borrowing grew at a ~22% TECHCOMBANK’S LOAN AND BOND ISSUANCE CAGR (’15-’17) CAGR from 2015 to 2017—much higher than TO VVIP CUSTOMERS % industry average, and banks do not have VND Tn sufficient capital to support such gro
Slide 14: …and meet expanding credit needs through leadership in debt capital markets
… and meet expanding credit needs through leadership in debt capital markets TOTAL TECHCOMBANK BOND ISSUANCE FOR VVIP’S UNDERWRITING FEE INCOME VND Tn VND Bn +18% +70% 397 409 32.0 34.6 294 64% 80% YoY YoY 133 12.0 10.4 2015 2016 2017 1H2018 2015 2016 2017 1H2018 CORPORATE BOND ISSUANCE IN VIETNAM A
Slide 15: We focus on customer solutions to improve customer experience and engagement
We focus on customer solutions to improve customer experience and engagement Our customers(1) Customer touchpoints: solutions, products and services TCB Client 35% Pro-Active Affluent RM Population: 261K Bancassurance TCB Credit Cards Client 7% Mortgages Mass 1% cash Affluent Branches Population: 2.
Slide 16: Differentiated transaction solutions improve customer engagement and value
Differentiated transaction solutions significantly improve customer engagement and enhance customer value VND TRANSACTIONS PER CUSTOMER VALUE PER TRANSACTION VALUE PER CUSTOMER Per month; Number VND Mn Per month; VND Mn 0 Fee ~2.3 x ~1.3 x ~2.9 x 3.5 14.1 49.4 12.9 11.2 2.3 29.7 Big Zero Fee 1.5 Cam
Slide 17: Higher customer engagement has driven retail banking growth
Higher customer engagement and interactions have driven retail banking growth… Highly engaged customers lead to increased product penetration, a solid retail portfolio, and revenue growth Highly engaged customers lead to the industry’s best acquisition, retention, and credit costs Higher product pen
Slide 18: Bespoke high value, high touch services for Affluent customers
…bespoke high value, high touch services allow us to meet our Affluent customers’ needs APE – BANCASSURANCE NET FEE – BANCASSURANCE Focus products VND Bn VND Bn 642 527 +74% +93% 443 432 319 288 Bancassurance 211 142 55% 31% YoY YoY 2015 2016 2017 1H2018 2015 2016 2017 1H2018 Wealth Management Advis
Slide 19: Strong focus on digital as key enabler
Strong focus on digital as key enabler for delivery of industry-leading services to customers Two-pronged approach to digital excellence Strengthen foundation to absorb customer volume and transaction growth Build next generation capabilities to increase revenue Strengthening the Building Next Gener
Slide 20: We continue to increase customer interactions and value through digital banking
We continue to increase customer interactions and value through digital banking A significant number of customers choose our platform Service level achieved due to automation E-BANKING CUSTOMERS E-BANKING TRANSACTION VOLUME E-BANKING TRANSACTION VALUE ‘000 Users MM Transactions VND Tn 1,092 22 23 31
Slide 21: Our investments are focused on revenue generating capabilities
Our investments are focused on revenue generating capabilities We are building market leading capabilities for our future We are investing ~ USD300 million in technology 2018 2019 2020 OUTCOMES Transaction banking Enable cross-sell Data analytics Enhance ecosystem Digital branch Improve customer exp
Slide 22: Increased customer interactions lead to value creation
Our approach is simple: increased customer interactions lead to value creation Area Differentiator Technology Digital banking (corporate) Value added services Transaction banking Wholesale Banking/ – Cash management Business Banking Ecosystem – Trade finance – Supply chain finance Data analytics – C
Slide 23: Employee Centricity is integral to our strategy
Employee Centricity is integral to our strategy Employee Centricity Deepen employee understanding Deliver meaningful support and solutions Better prepare employee to serve customers Satisfied and Satisfied and Value Creation Engaged Engaged and Financial Employees Customers Rewards Page 23
Slide 24: Our employees and how we support them
Our employees and how we support them Who are TCB employees? What do our employees want? Young, dynamic and committed workforce(1) Clear career path and professional development Age <30 Years old 65% Fair and generous compensation Tenure >3 Years 53% Positive and nurturing work environment Education
Slide 25: We emphasize employee training and development
We emphasize employee training and development Our People Our Solutions Our Results Leadership 346 courses program online and in-class(1) TCB Global Workshop VND33 Bn 2018 Training Budget BOM, front-line managers, future Special training leaders, program specialists 37,038 enrollments(1) Soft skills
Slide 26: Compensation to incentivize and motivate
Compensation to incentivize and motivate Our People Our Solutions Our Results Bank-wide tenure Years 6.47 Stock option 4.76 program Leading benefit 2016 1H2018 programs BOM, front-line HiPer Awards; Front-line employee tenure managers, future Outstanding Techcomers Years 5.24 leaders, Awards; 3.56 s
Slide 27: Strong human resources bring outstanding performance
Strong human resources bring outstanding performance Satisfied, engaged and effective workforce Employee Nationally recognized work environment Engagement Survey Top 3 Dimensions Results Clear and promising direction 93% Quality and customer focus 86% Work structure and process 84% 61% TOI per emplo
Slide 28: Vietnam Macroeconomic Environment
Vietnam Macroeconomic Environment Vietnam Real GDP Growth (%) GDP growth is still expected to reach government 11 target of ~6.7% in 2018, but there is heightened Quarter (YoY) Annual uncertainty on growth heading into 2019: 9 8.5 World: impact of potential trade conflict between 8.4 8.2 6.77 7 6.3
Slide 29: Vietnam Banking Sector
Vietnam Banking Sector YoY Vietnam banking sector performance in 4M2018: Metric Units Apr-17 Dec-17 Apr-18 (%) Overall banking system continues to grow on the strength of the underlying Vietnamese economy Total assets VND Tn 8,820 10,002 10,190 15.5 Total sector assets of VND10,190 Tn (+15.5% YoY) T
Slide 30: Performance through 1H2018 reflects ongoing execution of strategy
Performance through 1H2018 reflects ongoing execution of strategy ROAA has improved significantly RATIO 1H/2018 1H/2017 Change (bps) YoY through strong profit growth ROAE (LTM) 24.3% 20.6% 373 and by removing legacy bad debts from the balance sheet ROAA (LTM) 3.16% 1.83% 133 NIM 3.7% 3.9% -21 Asset
Slide 31: Progress continues in repositioning our balance sheet
Progress continues in repositioning our balance sheet Loan growth is expected to pick up in the 2H2018 with a greater emphasis on increasing our retail/PFS loan book We are seeing strong growth in BB through our short-term working capital lending programs The shift from medium- and long-term loans t
Slide 32: Highest first half revenue and PBT in bank history
Highest first half revenue and PBT in bank history Improvement across all business activities led to 20% TOI growth Provision expenses in 1H2018 decreased by 56% after fully writing off bad debts related to VAMC in 2017 8,659 1H2018 Earnings -1,044 VND Bn 1,488 940 -2,419 1,181 • Gain from TCF 5,196
Slide 33: Thirteen straight quarters of YoY profit growth
Thirteen straight quarters of YoY profit growth Transformation is working and translating into sustainable bottom line growth REVENUE YoY GROWTH (%) 85.9 67.7 34.0 27.9 26.0 28.8 26.8 23.7 20.4 16.2 19.0 13.1 0.0 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2015 2016 2017 2018 PROFIT YoY GROWTH 182.2 (%)
Slide 34: Growth of non-lending income remains a strategic priority
Growth of non-lending income remains a strategic priority In 1H2018, revenue from all activities grew compared with the same period last year, highlighted by strong gains in financial assets Share of revenue from non-NII grew from 38.9% in 1H2017 to 41.7% in 1H2018 SOURCES OF REVENUE YoY GROWTH VND
Slide 35: Techcombank leads the market in key profitability metrics
Techcombank leads the market in key profitability metrics Profitability scorecard reinforces and reflects success in executing on our strategy Operating efficiency through technology investments, high employee productivity and ecosystem approach, combined with significant contribution from non-lendi
Slide 36: Strong balance sheet provides significant room for growth
Strong balance sheet provides significant room for growth Our balance sheet strength provides a significant competitive and scale advantage by allowing us to invest in technology and talent development to better serve the evolving needs of our customers We will continue to strengthen our capital pos
Slide 37: 1H2018 Takeaways
1H2018 Takeaways Phase 1 transformation has been a success by all measures Strategy, people, and capital are in place to drive Phase 2 of our transformation Customer centricity and relentless execution in core focus areas will continue to drive profitability and long-term value creation Page 37
Slide 38: Appendix: Glossary
Appendix GLOSSARY APE : Annual Premium Equivalent BB : Business Banking CAGR : Compound Annual Growth Rate CAR : Capital Adequacy Ratio CASA : Current Accounts & Saving Accounts DCM : Debt Capital Market GSO : General Statistics Office of Vietnam GTS : Global Transaction Services IB : Investment Ban
Slide 39: Disclaimer
Disclaimer The information in this presentation is being provided as a historical, reference source only and is not being used for, and nothing in this presentation constitutes an offer, invitation or recommendation to sell or issue, or any solicitation of any offer to purchase or subscribe for, sec
Slide 40: Thank you
Thank you