42 slides from Vietnam Technological & Commercial Joint Stock Bank's earnings presentation, Feb 26, 2020
Slide 1: Techcombank 2019 Analyst Presentation
Techcombank 2019 Analyst Presentation HCM City, 26th February 2020
Slide 2: Executive summary
Executive summary Customer centricity is core foundation of Techcombank’s strategy Everything we do center around serving our target customers’ financial needs Customer centric business strategy at Techcombank: Over the past 5 years: Key is to understand and serve our customers’ financial needs – bu
Slide 3: Agenda
Agenda I Macroeconomic review for 2019 and outlook for 2020 04 II Review of 2019 business performance and 2016-2020 strategy 10 III Review of last 5 years Customer centric – marketing led business model 18 This model leads to more than 1 million customer additions to bank in 2019 IV Illustrate how o
Slide 4: Vietnam economy in 2019
I Vietnam economy in 2019 The economy recorded strong growth in recent years with major contribution from Industry, Construction, and Services In 2019, Manufacturing, Construction and Services grew with high YoY rate (8-11%), contributing to GDP growth of 7.02% Vietnam GDP growth contribution by sec
Slide 5: Vietnam economy in 2019 (cont'd)
I Vietnam economy in 2019 (cont’d) Macro and political stability together with high growth prospects continued to attract capital Record high trade surplus of 11 Bn USD SBV purchase of 20 Bn USD to increase national FX reserves FDI volume Trade balance and FX purchase volume USD Bn USD Bn Disbursed
Slide 6: Vietnam GDP growth outlook in 2020
I Vietnam GDP growth outlook in 2020 Initial estimates suggest Vietnam economy to grow by 6.8% YoY Potential impact of COVID-19 epidemic on GDP growth: 0.5-0.9% decrease depending on severity level Forecast Vietnam GDP growth rate % 7.3 7.1 6.9 6.80 6.7 6.5 6.3 6.25 6.1 5.9 5.88 5.7 5.5 2015 2016 20
Slide 7: Average YoY headline CPI in 2020 expected to be under control at around 4%
I Average YoY headline CPI in 2020 expected to be under control at around 4% Average YoY headline CPI in 2020 expected to be around 4% amid rising food prices since late last year Impact of COVID-19 on CPI still unclear Assumptions for CPI forecast in 2020 Due to currently higher core CPI rates, cre
Slide 8: Impact of Corona epidemic on exchange rate: VND depreciates by 0.2-0.5%
I Impact of Corona epidemic on exchange rate: VND depreciates by 0.2-0.5% Revenue from foreign tourists Balance of Payment USD/VND rate USD Bn USD Bn Average interbank rate 0.2% 0.5% 20.0 Stable, max 0.5% 23,460 -30% -50% 23,390 18.9 -17% -43% 23,344 15.5 23,228 16.6 12.5 12.8 14.8 23,025 13.3 8.8 1
Slide 9: Banking system liquidity expected to remain ample
I Banking system liquidity expected to remain ample 2020 credit growth adversely affected by COVID-19 in the beginning months, and also under closed control by the SBV due to higher core CPI rates Deposits expected to grow at higher rate (than credits), as net FX inflows are likely to continue. As a
Slide 10: We are achieving our 5-year strategic objectives
II We are achieving our 5-year strategic objectives Techcombank successfully executed its “low risk – high return” strategy, leading in effectiveness with #1 ROAA ratio of 2.86% Achieved most strategic objectives, working on expanding product holding to all focus customer segments #1 bank in effecti
Slide 11: Healthy balance sheet and diversified revenues for continued growth
II Healthy balance sheet and diversified revenues for continued growth 1 Since 2015, equity has increased ~4x while total assets has nearly doubled 2 CASA has nearly tripled contributing to lower funding costs 3 PAT increased by ~ 7x 4 Revenue grew an average of 23% per year since 2015 Total assets
Slide 12: Customer centric strategy wins customer trust with over one million new customers added in 2019
II Customer centric strategy wins customer trust with over one million new customers added in 2019 Continuous customer growth since 2015, 23.5% annual growth rate Exponential e-banking customer usage improves customer satisfaction and trust Leading bank in cashless transactions Number of new custome
Slide 13: "Low Risk – High Return" Business Model has led to non-stop growth
II “Low Risk – High Return” Business Model has led to non-stop growth since we started our journey in 2016 23% YoY revenue growth since 2015 17 consecutive quarters of YoY revenue growth Quarterly revenue growth is seasonal, with Quarter 3 and Quarter 4 having the highest YoY growth rates Total reve
Slide 14: Our credit portfolio continues to track "Low risk – High return" strategy
II Our credit portfolio continues to track “Low risk – High return” strategy Targeted customer segments are key to our “Low Risk – High Return” strategy of our loan book Balance sheet continues to shift to lower risk segments such as retail residential mortgages Credit costs reduced >40% YoY over th
Slide 15: Credit concentration has been the area of interest
II Credit concentration has been the area of interest We are going to address Credit concentration risk investors’ concern Exposure to housing sector Exposure to a few large corporate customers 15
Slide 16: We remain focused on six high growth economic sectors
II We remain focused on six high growth economic sectors These domestic, consumption-related economic sectors constitute more than half of Vietnam’s GDP (~54% in 2019) with ~39% of the country workforce. They are growing at more than twice the rate of GDP: 16% vs 7%1 We apply the value chain approac
Slide 17: We understand how to support the housing sector
II We understand how to support the housing sector TCB monitors and manages exposure to housing sector across the development phase Corporate credit exposure is 58% of total housing portfolio Retail credit exposure to housing market is 42% of total housing portfolio The average RWR of project value
Slide 18: Customer centric strategy requires differentiated interaction model for each customer segment
III Customer centric strategy requires differentiated interaction model for each customer segment Increasing customer engagement and enhancing experience through all services and channels - full range of customer interaction – from free automated, low touch services (e.g., internet banking, mobile b
Slide 19: Customer Centric Model in action - Understanding customer insights by segment
III Customer Centric Model in action - Understanding customer insights by segment is foundation of all business activities. Three key stakeholders: Customers, employees, owners – CEO CUSTOMERS EMPLOYEES OWNERS / INVESTORS • Fast/ convenient/ • Updated and consistently • Frequent and transparent • Ch
Slide 20: Customer Centric model – Marketing led organization from Market Research to Brand
III Customer Centric model – Marketing led organization across activities from Market Research to Brand Positioning Journey (2015 – 2019) MARKET/ CUSTOMER INSIGHTS BRAND POSITIONING Optimistic & Self-determined BRAND PROMISE: APPROACH TO BUILD The Vietnamese people are united by a BRAND PROMISE Tech
Slide 21: Implement the purpose-driven brand positioning strategy to help each individual to "Be greater"
III Implement the purpose-driven brand positioning strategy to help each individual to “Be greater” everyday Techcombank is quickly becoming the brand that people trust and we want people to love Techcombank brand Being trusted and loved by more than 90 million of Vietnamese. Top 10 most valuabl
Slide 22: Introduce "Be Greater" Movement Model for 2020 and beyond
III Introduce “Be Greater” Movement Model for 2020 and beyond Create massive awareness, inspire people about Be greater Movement Donate and grant for multi-organizations • Most updated content about the movement. in Vietnam Personalize the content base on their • Share love and empathy to needed BE
Slide 23: Transform our Business Model to meet and exceed our customers' expectations
IV Transform our Business Model to meet and exceed our customers’ expectations Increasing customer engagement and enhancing experience through all services and channels - full range of customer interaction – from free automated, low touch services (e.g., internet banking, mobile banking) to one-on-o
Slide 24: Our customers are transacting more frequently – They need fast, secure, convenient and low cost
Our customers are transacting more frequently – They need fast, secure, IV convenient and low cost: We responded by moving to digital and made it zero cost! Required over USD100 Mn in technology investment over 3 years Coordinated efforts from Technology / Operations to Front-line branch services, p
Slide 25: Our customers are delighted and increasing digital transactions at an exponential rate
IV Our customers are delighted and increasing digital transactions at an exponential rate E-banking transactions increased rapidly both in volume and value of transactions in all segments Became #1 in transaction volume in mobile banking transaction on Napas at 33% of total volume1 Volume of E-banki
Slide 26: This helps us mobilise low cost funds – 34.5% CASA ratio
IV This helps us mobilise low cost funds – 34.5% CASA ratio CASA ratio has increased from 22.7% to 34.5% in four years Low cost deposit growth comes from increased customer engagement via payments and digital solutions Deposit balance CASA by sector VND Tn VND Tn WB SME Retail CASA TD 80 231 +28% 14
Slide 27: Customer cashless transactions in line with SBV direction lead to increased demand deposits
IV Customer cashless transactions in line with SBV direction lead to increased demand deposits Our customers shift toward cashless transaction volume, in line with SBV direction 2.6x growth in Retail CASA/Total Deposit (from 10.6%-27.5%) Help us become #1 in total volume visa credit and debit card i
Slide 28: Shifting to retail mortgages continues to be focus of our strategy
IV Shifting to retail mortgages continues to be focus of our strategy Shift away from higher-risk products to lower-risk mortgages and auto loans for affluent and mass affluent NPL for mortgage product and NPL for retail banking reduced significantly to 0.6% and 1.8% respectively Retail Customer Seg
Slide 29: TOI is well balanced between corporate and retail segments
V TOI is well balanced between corporate and retail segments No one-off items in 2019 – all reported revenue come from core business Retail remains largest contributor to TOI (~41%), grew from 37% in 2015 Affluent segment contributes the largest portion (60%) to the revenue of retail business TOI by
Slide 30: Net interest income is supported by a strong growth in credit balance and healthy NIM
V Net interest income is supported by a strong growth in credit balance and healthy NIM Net interest income grew by 18.6% from 2015 to 2019, aligning with the growth of 20% in credit balance Net interest margin remains healthy as lower funding costs offset lower lending rates Credit balance Lending
Slide 31: Growing interest income and reducing credit costs reflect low risk – high return business model
V Growing interest income and reducing credit costs reflect low risk – high return business model By shifting loan portfolio from WB to SME and retail segments, net interest income from SME and retail customers grew by 17.3% and 23.1% from 2015 to 2019 Legacy credit loss provisions declined from a h
Slide 32: Net fee income has nearly tripled since 2015, with growing contribution from retail
V Net fee income has nearly tripled since 2015, with growing contribution from retail Contribution in net fee income from retail overall and AFF/MAF in particular, has benefited from growth in banca and wealth management businesses Corporate net fee income benefitted from strong Q4 performance in DC
Slide 33: Non-interest income growth outpacing interest income growth by nearly 2x since 2015
V Key metric of our strategy: Non-interest income growth outpacing interest income growth by nearly 2x since 2015 Non-interest income up 3.2x since 2015 Total revenue VND Tn, % NII NoII1 CAGR, % 21.1 18.3 +23% Same rate as our 15.0 credit growth 14.3 11.4 (68%) 19% 11.8 (62%) 8.9 9.3 (59%) 8.1 Much
Slide 34: Expense discipline to be maintained but investments will increase
V Expense discipline to be maintained but investments will increase to support on-going transformation YTD bank’s headcount increased by 1,399 to accommodate customer growth of >1 million CIR continues to be competitive despite investment in technology, people and branding, reduced from 39% in 2015
Slide 35: Record results driven by performance of core business
V Record results driven by performance of core business YoY growth across core business combined with expense management and lower provision expenses contributed to record results Diversity of earnings reflects disciplined execution of strategic plan FY19 Earnings VND Bn, % 21,068 1,080 5,730 7,313
Slide 36: Diversity of earnings and low risk costs provide competitive advantage
V Diversity of earnings and low risk costs provide competitive advantage Post provision PBT has improved significantly over the last few years as the bank improved asset quality and wrote off legacy bad debts Profit before tax VND Tn +23% +58% 21.1 -7.3 18.3 -5.8 11.8 16.5 General1: 0.4 General1: 0.
Slide 37: Robust capital and liquidity position a strength during periods of uncertainty
V Robust capital and liquidity position a strength during periods of uncertainty CAR ratio of 15.5% is nearly double SBV requirement of 8% Liquidity remains ample with access to diversified funding sources given strong capital position and credit ratings Equity Funding structure VND Tn VND Tn Interb
Slide 38: 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 39: Glossary
Glossary ASEAN : Association of Southeast Asian Nations OHI : Organizational Health Index CAGR : Compounded Annual Growth Rate Opex : Operating expense CAR : Capital Adequacy Ratio P/B : Price-to-book ratio CASA : Current Accounts and Saving Accounts PAT : Profit after tax CIR : Cost-to-income ratio
Slide 40: Appendix
TECHCOMBANK <>
Slide 41: FY19 Financial highlights (1/2)
FY19 Financial highlights (1/2) VND Bn FY19 FY18 YoY change (%) Total assets 383,699 320,989 19.5% Credit1 261,400 219,595 19.0% Deposits 231,297 201,415 14.8% Total operating income 21,068 18,350 14.8% Operating expenses (7,313) (5,843) 25.2% Profit before tax 12,838 10,661 20.4% Key financial rati
Slide 42: FY19 Financial highlights (2/2)
FY19 Financial highlights (2/2) VND Bn FY19 FY18 YoY change (%) Loans to customers 230,802 159,939 44.3% Retail 105,247 72,384 45.4% SME 44,921 31,434 42.9% WB 80,634 56,122 43.7% Deposits from customers 231,297 201,415 14.8% Retail 167,212 142,056 17.7% SME 28,740 23,592 21.8% WB 35,345 35,766 -1.2