Techcombank chairman points to customer selection for low-risk, high-returns model

Ho Hung Anh was addressing shareholders at the lender’s annual general meeting on Saturday when a shareholder asked: "How does Techcombank manage to maintain its low risk-high returns model? As a rule of thumb, high returns must be accompanied by high risks."

A representative of a group of foreign investors with over 200 million shares also raised questions about the bank's risk management ability, particularly with respect to unexpected risks such as the Covid-19 pandemic.

Anh replied that the bank proactively selects its customers and only focuses on customer groups with high incomes and good repayment ability.

"Instead of working with 10 customers, we only choose to work with the three best customers. Instead of expanding to 10 sectors, Techcombank only participates in the two or three sectors that we understand well and can manage the risks."

In the resort segment, for instance, Sun Group and Vingroup account for a total 70 percent market share, thus the bank has chosen them as major customers, Anh added.

For 2020 shareholders approved a consolidated profit target of around VND13 trillion ($559 million), or a 1 percent increase year-on-year. The performance indicators are the same as in previous years with the net interest margin being over 4 percent.

The bank explained the plan is conservative since it had to take into account the facts that customers could be affected by the novel coronavirus pandemic and the bank's debt restructuring in line with a new State Bank of Vietnam circular could impact profits.

Anh said: "Techcombank has drafted a cautious plan to ensure that everything is under control. Should the pandemic situation turn positive, the bank could consider amending the plan in Q3 or Q4."

The impact of Covid-19 on the bank has not been significant since the creditor does not have many customers belonging to severely affected sectors like aviation, textile and tourism. The customers of such sectors are recovering, except for Vietnam Airlines, he noted.

"These sectors manage risks using a different model, so we are cautious. As long as we have not developed a risk management model, Techcombank will not take exposure."

Asked by another shareholder about the bank's ratio of outstanding loans to the property sector being relatively large, he said Techcombank's growth in recent years has proven this to be the correct decision.

The bank has carefully selected customers and developed an appropriate risk evaluation model for the sector, he added.