33 slides from Vietnam Technological & Commercial Joint Stock Bank's earnings presentation, Jul 31, 2019
Slide 1: 1H19 Analyst Presentation
1H19 Analyst Presentation July 31, 2019 1
Slide 2: Executive summary
Executive summary A record year so far and have posted stellar earnings in 1H19 continuing the trend of 15 consecutive quarters of YoY growth (revenues VND8.7 Tn1 in 1H19, 19% YoY growth; PBT VND5.7 Tn2 in 1H19, 32% YoY growth) Continue to focus on a low risk - high return strategy, we are minimizin
Slide 3: Our 5-year strategy calls for higher growth in revenues than balance sheet
Our 5-year strategy calls for higher growth in revenues than balance sheet Revenue grew at 18% while balance sheet grew ~17% between 2016-18 Total assets Total revenue1 VND Tn, % Other assets Corporate bonds Loans VND Tn, % Second half First half 2019 projection 17% 361 321 269 115 235 101 87 61 78
Slide 4: We have been growing non-stop since we started our transformation journey in 2016
We have been growing non-stop since we started our transformation journey in 2016 15 consecutive quarters of YoY revenue growth Quarterly revenue growth is seasonal, with Quarter 3 and Quarter 4 having the highest YoY growth rates Quarterly revenue1 VND Tn, % 4.4 4.3 4.4 11% 4.2 18% 26% 22% 3.6 3.7
Slide 5: Record quarterly growth put us in a leadership position among all banks in Vietnam
Record quarterly growth put us in a leadership position among all banks in Vietnam and in the region Techcombank is a leader in the retail, corporate, and investment banking Our dominance comes as a result of a solid foundation and best-in-class execution #1 in Mobile banking Leading ASEAN and India
Slide 6: However there are three specific areas of interest
However there are three specific areas of interest Business execution Regulations Market trend Credit concentration risk Limited credit growth NIM compression Exposure to real estate Topline credit growth constraints due to NIM degradation leading to lower revenue limits prescribed by regulators gro
Slide 7: These are addressed through our 2016-2020 customer-centric strategy
These are addressed through our 2016-2020 customer-centric strategy We aim to be the # 1 Bank in Vietnam in capital effectiveness and Focus on hiring, in market training and capitalization retaining the most talented team Together we will Laser focus on achieve our annual risk management growth targ
Slide 8: However there are three specific areas of interest
However there are three specific areas of interest Business execution Regulations Market trend Credit concentration risk Limited credit growth NIM compression Exposure to real estate Topline credit growth constraints due to NIM degradation leading to lower revenue limits prescribed by regulators
Slide 9: Our credit concentration is well under regulatory limits
Our credit concentration is well under regulatory limits As per our strategy, we selectively choose customers to partners and provide end-to-end solutions across their value chains Our valued large corporate customers have diversified businesses and maintain healthy credit ratings Our highest concen
Slide 10: Shifting the bank's portfolio to SME and retail customers to further reduce concentration risk
Shifting the bank’s portfolio to SME and retail customers to further reduce concentration risk Shifting the loan portfolio from large corporate clients to SME and retail customers to minimize large exposures and drive profitability SME loan book grew at 31% against a decline of 5% in large corporate
Slide 11: To diversify our portfolio, we are focusing on six high-growth economic sectors
To diversify our portfolio, we are focusing on six high-growth economic sectors These domestic, consumption-related economic sectors constitute nearly half of Vietnam’s GDP (~48% in 2018) with ~41% of the country workforce and are growing at more than twice the rate of GDP: 16% vs 7%1 We apply the v
Slide 12: Housing value chain focuses on homeowners; reducing concentration risk and minimizing credit risk
Housing value chain focuses on homeowners; reducing concentration risk and minimizing credit risk Our exposure to the real estate sector is distributed across the value chain with risk dispersed into several sub-segments Value chain approach applied to housing sector with a focus on reaching end-use
Slide 13: At the same time, we are systematically building businesses in the other sectors
At the same time, we are systematically building businesses in the other sectors Diversifying into six economic sectors using the value chain approach Our goal is to have equal exposure across six economic sectors, in line with Basel II Long term needs Daily needs SME 1 Financi Utilities 79% YOY gro
Slide 14: Our FMCG sub-segment propositions have started to deliver strong results
Our FMCG sub-segment propositions have started to deliver strong results FMCG active customers1 FMCG revenue1 # 467 VND Bn 34% 85 391 89% 283 291 52 45 40 56% 30% YoY YoY 2016 2017 2018 1H19 2016 2017 2018 1H19 FMCG loan balance1 VND Bn ~ 30% Growth in number of active customers 4,259 228% 3,984 ~ 7
Slide 15: However there are three specific areas of interest
However there are three specific areas of interest Business execution Regulations Market trend Credit concentration risk Limited credit growth NIM compression Exposure to real estate Topline credit growth constraints due to NIM degradation leading to lower revenue limits prescribed by regulators
Slide 16: Issuing corporate bonds helps our clients meet their capital investment needs without growing our loan book
Issuing corporate bonds helps our clients meet their capital investment needs without growing our loan book We arrange capital market solutions to support long-term credit needs of large corporate customers without needing to increasing our loan book This process converts interest income into fee in
Slide 17: We purposely de-emphasize credit growth, and focus on non-interest income growth
We purposely de-emphasize credit growth, and focus on non-interest income growth Drive non-interest income to reduce dependency on lending and ride out negative impacts of credit cycles Non-interest income has grown at over 22%1 between 2016-18; interest income grew almost in line with credit betwee
Slide 18: To drive non-interest income, we continue to focus on fee and trade finance
To drive non-interest income, we continue to focus on fee and trade finance Focus on customers’ long-term and daily financial and transaction needs Bancassurance offers protection while bonds serve investment needs #1 in Visa card transaction volumes Examples of fee income growth Bancassurance fee i
Slide 19: However there are three specific areas of interest
However there are three specific areas of interest Business execution Regulations Market trend Credit concentration risk Limited credit growth NIM compression Exposure to real estate Topline credit growth constraints due to NIM degradation leading to lower revenue limits prescribed by regulators
Slide 20: We're focusing on increasing low-cost funds to maintain healthy NIM
We’re focusing on increasing low-cost funds to maintain healthy NIM NIM in Vietnam continues to be healthy in comparison to banks in the region Despite a decline in lending rate, NIM at TCB continues to be healthy, largely driven by growth in low-cost funds Our NIM is higher than industry average of
Slide 21: We are mobilizing low-cost funds - CASA ratio currently at 30.4%
We are mobilizing low-cost funds - CASA ratio currently at 30.4% The bank’s CASA ratio has steadily increased from 22.7% to 30.4% in three and a half years Low-cost deposit growth comes from increased customer engagement via payments and digital solutions Deposit balance Payment solution VND Tn, % C
Slide 22: CASA mobilization is supported by payment solutions
CASA mobilization is supported by payment solutions … We are the #1 Vietnamese bank in Visa card transaction volume and value with sustainable growth each year No. of Visa debit cards No. of Visa credit cards Thousands Thousands 5% 619 223 507 19% 184 459 486 130 140 28% 43% YoY YoY 2016 2017 2018 1
Slide 23: …while digital channels increase customer engagement
…while digital channels increase customer engagement Successful Zero fee online banking program resulted in strong growth in transaction volume and CASA and leading to higher customer engagement Bold and successful IT investments and implementation enabled 20x increase in transactions per month sinc
Slide 24: …leading to impressive growth in retail CASA
…leading to impressive growth in retail CASA CASA growth rate since January 2018 has been more than 6x the industry average Retail CASA growth trend (2016-1H19) VND Tn 1% cash-back launched 34 Retail growth 32 30 Techcombank 68% YOY 28 +4.3% 61% 26 24 Zero fee launched 22 20 Retail proportion 18 16
Slide 25: We have three areas of interest to address
We have three areas of interest to address Business execution Regulations Market trend Credit concentration risk Limited credit growth NIM compression We had Use strategy to create additional opportunities: taken these Increase customer base concerns into account in Deepen customer relationship and
Slide 26: Housing value chain focuses on homeowners; reducing concentration risk and minimizing credit risk
Housing value chain focuses on homeowners; reducing concentration risk and minimizing credit risk Our exposure to the real estate sector is distributed across the value chain with risk dispersed into several sub-segments Value chain approach applied to housing sector with the focus on reaching end-u
Slide 27: … and generating superior economic value
… and generating superior economic value Mortgage customers acquired from the value chain are highly engaged, loyal, and subscribe to Techcombank product offerings Total customer base increased 2.5x; AUM increased ~3.9x while loan balance increase ~1.9x from 2016 to 1H2019 Revenues grew at 48% CAGR
Slide 28: Low risk – high returns means driving revenue growth while maintaining low NPLs
Low risk – high returns means driving revenue growth while maintaining low NPLs and provision expenses TCB maintains a prudent approach in balance sheet growth and credit management which keeps NPLs below the industry average We report “true” NPL, and have completely written-off our legacy bad debts
Slide 29: Executing our strategy and business model has led to sustained revenue and profit growth
Executing our strategy and business model has led to sustained revenue and profit growth Revenue has been growing consistently, delivering record 1H19 earnings and the highest ROA in Vietnam’s banking sector Non-interest income in 1H19 was driven by healthy growth in bond issuance and bancassurance
Slide 30: Increasing investor communication should drive a share price that better reflects our business performance
Increasing investor communication should drive a share price that better reflects our business performance and market-leading position There is a significant valuation gap in our stock price when benchmarking ourselves against domestic and regional peers Based on our 2018 ROE of 21.5%, we should be
Slide 31: Glossary
Glossary AUM : Asset under management P/B : Price per book CAGR : Compounded Annual Growth Rate PAT : Profit After Tax CAR : Capital Adequacy Ratio PBT : Profit Before Tax CASA : Current Accounts and Saving Accounts ROAA : Return on Average Assets FMCG : Fast-moving Consumer Goods ROAE : Return on A
Slide 32: 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 33: Be Greater