Techcombank CEO confirms focus on retail customers

Jens Lottner, CEO of Techcombank. Photo courtesy of Techcombank

How would you characterize the bank's standing now as against at the time it was incorporated?

Founded with a capital of US$1 million, Techcombank was a very small operation with a very strong entrepreneurial spirit to serve Vietnam's growing private sector.

Through the years the bank’s capital has grown to around US$5.3 billion, one of the highest in the country.

What has remained consistent from the very beginning is Techcombank’s entrepreneurial spirit and culture.

As Vietnam’s economy grew and became more dynamic, Techcombank was a pioneer, spearheading its development.

The founding fathers of the bank came from very strong engineering backgrounds, and were not traditional bankers.

Therefore, as an institution, Techcombank has always used technology as an enabler and has always done things a bit differently compared to other banks.

Looking back, I think that while we are now very different as a leading bank from how we were at the start, much bigger, much stronger, and definitely much more profitable, some of the core elements of technology and entrepreneurship have continued.

What were some of the most significant challenges the bank encountered in its 30-year journey?

Between 2011 and 2013, the whole industry was quite challenged. Techcombank was probably the first to come out of that crisis, having cleaned up its credit book and being very strong on the capital side.

It was a very formative experience for what you are seeing right now, and we have strong risk management capabilities and are well capitalized as a result.

Therefore, we need to do things a bit more daringly and break the mold on a regular basis.

Whenever we think we are done, it is actually just the beginning of something new. If you work with us, you will see that we are never content, always on the move, and always trying to do something differently to meet the rapidly changing banking needs of customers as the country, the sector and people’s living standards evolve.

In a way, that poses a never-ending challenge, as movement needs to be managed. But ultimately, it's part of our DNA and one of our biggest strengths.

As you approach your fourth year as CEO of Techcombank, what do you regard as your most notable achievements?

I would say that one of the strategies that we have pushed forward over the last three years is digital transformation.

A lot of investments were made to transform the bank and its capabilities. At the same time, our customer growth has accelerated.

Our aspiration is not just to be one of the largest private banks, but to shape the transformation of the Vietnamese banking industry and be one of the leading banks in the region.

To achieve this, we needed a different technology platform and to transform into an even more digitally-enabled bank, focusing on talent, data and technology.

What are the distinctive architectural, design and workspace attributes of your two iconic towers in Hanoi and HCMC, the two new head office buildings, and their significance?

While the buildings are very beautiful from the outside, we put in a lot of work from the inside. The aim is to create a different work experience for our employees.

We tried to answer these questions: "For the workforce of the future, what is required? What do people like? What are they expecting?"

For a lot of people, employment is not just about money but also the environment they work in.

We put ourselves in their shoes and asked, "If we were in Silicon Valley, Singapore, or London and decided to come back to Vietnam, what kind of atmosphere would we expect to find?"

We then gave this job to Fosters + Partners, one of the world's most renowned architectural firms, which built the Apple headquarters in Cupertino. And the spectacular buildings you see now are the result.

Techcombank's headquarters office in Hanoi. Photo courtesy of Techcombank

The headquarters in Hanoi was designed with a mindset of fusion between old and new, with some of the elements being inspired by the old quarter.

On the outside, there's a lot of brown and gold, and on the inside, you come across wooden doors and gold framing. These are typical colors and features of the old quarter.

Particularly, there is a break between the sixth floor and everything upward, with the height of the sixth floor matching the old quarter's usual height.

On top of that, everything has a distinct style, building upon the foundation of the old and incorporating new elements.

As we put a lot of thought into the architectural design, it carries the message we want to convey.

It is important for us to be, on the one hand, a Vietnamese bank inheriting Vietnamese cultural values, but on the other, breaking through and doing something new and innovative.

These buildings were very much about customer centricity, innovation, and collaboration, with all the working spaces built to accommodate agile ways of working.

Our employees don't have a specific seat; they can work on any floor and at any table.

At meetings, we can easily reconfigure our staff and bring people together for new teams during breakouts.

And while these buildings are a lot about digital enablement and digital tools, they are also built with a focus on sustainability and energy efficiency, making sure that we don't waste resources but make the most of them.

It was outlined at the 2023 annual general meeting that Techcombank will place greater emphasis on its retail segment while diminishing its dependence on corporate clients. Has there been any deviation from this?

We are still very clear that we want to do more retail and SME lending and that we don't want to expand our corporate exposure as a proportion of the total bank-wide book.

However, as we operate a need-based model and a customer-centric approach, this may not hold during certain periods.

For example, based on our quarterly analysis, we need to watch what is happening in the market right now. In the retail segment, credit demand has been soft due to high interest rates.

In addition, when we look at SMEs, manufacturing and some other areas, there is not a lot of demand for credit. Even if we had given away money at much lower rates, these companies would not have taken it.

In this environment, the big companies and corporations are usually the ones who fare better because they have much more diversified cash flow streams.

So, as we were looking at where the needs were and where the risk-adjusted returns were better, it was on the corporate side.

That being said, it does not mean we won't reallocate funds back into retail and focus on SMEs, which is actually our desired direction.

When you examine our financial data, you will notice that some figures, particularly on the corporate side, represent short-term working capital financing.

This flexibility allows us to transition relatively quickly to other segments and sectors. So, I believe our strategy remains intact; our primary focus is still on retail.

However, in the current circumstances, we might continue to emphasize corporate lending because it appears to be less risky.

Nevertheless, as the market evolves, we will gradually shift our focus back to retail and SMEs. This is more of a timing issue than a strategy issue.

Can we expect Techcombank to offer a dividend "gift" to shareholders to celebrate its 30th anniversary as its chairman said at the 2023 AGM?

The chairman’s directive 10 years ago was to not pay dividends for 10 years, and so now is the time to revisit that statement.

In essence, we always look at the optimization of capital, and one of the key areas is to maintain a 15% capital adequacy ratio in line with prudent banking practices.

In addition, we want to make sure we can continue a 20% earnings growth trajectory. To date, we have maintained this through our own retained earnings, with no need to tap the markets for more capital.

When we issued the policy 10 years ago, we were in a very different position.

After a decade of delivering strong results, Techcombank has grown to become the #1 private sector bank in Vietnam with a strong retail banking focus and best-in-market digital banking capabilities.

Today, the bank generates over VND20 trillion ($820.18 million) in profits annually, the highest among private sector banks in Vietnam.

Now, as we look at the bank’s earnings potential and the changes in upcoming regulations, we believe that we can maintain that trajectory of 20% earnings growth and 15% CAR while still paying regular cash dividends to reward the bank’s shareholders.

As we are analyzing whether we can maintain such a policy for the next five to 10 years, it is important to note that we make our decision from a capital management perspective and not just as a birthday gift.

When the board decides if there will be a change in our dividend policy, I am sure they will make the proper announcements. But from the current analysis, it seems that we clearly have options.

Graphics by Techcombank.

Can you elaborate on Techcombank's strategy for sustainability and responsible banking since the former is becoming an increasingly important factor in the banking and finance world?

When it comes to sustainability, a lot of people interpret it only as green financing or keeping climate neutral.

While these are important elements, for me, creating a sustainable business means building it with a solid foundation and making sure it can last through the natural boom-bust cycles of the economy. That principle has always run deep in our hearts.

On the business side, we try to help our customers gain clarity on what and how they can build their own sustainable companies.

With the help of organizations like USAID and the ADB, we work to provide financing solutions and are committed to providing around $5 billion in financing for sustainable projects.

At the moment, there is probably not enough demand in the industry as people still consider sustainability a "nice-to-have."

We are shifting away from that mentality gradually, and Techcombank has built in-house capabilities to channel green financing to our customers, but there is still more work to be done.

Internally, within our daily operations, all the rooms in our new buildings are closely monitored electrically. We have installed significant sensor technology in our offices to optimize our energy efficiency.

If there is not enough movement, lights and air conditioners will be automatically turned down.

If we can keep our costs down, we will be able to provide our products and services at a better price for our customers.

Personally, I think we should not think about sustainability as a "do-good" exercise.

Rather, it needs to be integrated deeply with economic sense, and increasingly people will start to understand and internalize that concept.

A comprehensive ESG materiality assessment conducted by Techcombank. Graphics by Techcombank