Banks bet on non-interest income

The banking industry in Vietnam continued to have profit growth in 2024, while bank-to-bank business performance differed. Along with variations in non-interest revenue from service fees, trading in investment securities, and bad debt recovery, banks themselves also saw varying trends in the growth of their net interest income, with some seeing increases and others seeing decreases.

Divergence in Non-Interest Income

One of the highest sources of non-interest income for banks in previous years—before the confidence crisis in the insurance market of 2022–2023—was bancassurance. This segment generated hundreds of billions of VND in revenue for banks such as MB, VPBank, Techcombank, VIB, HDBank, Sacombank, and TPBank in 2024. However, it remains unclear whether growth has fully recovered.

For instance, VPBank saw insurance revenue of VND 4,151 billion, a 41.31% increase compared to 2023 and a 23.76% rise from 2022. Meanwhile, Techcombank, despite maintaining its third-place ranking in annualized premium equivalent (APE), reported insurance service fee income of VND 605.7 billion, down 9.2%. Techcombank attributed this decline to the termination of its exclusive distribution agreement with Manulife in October 2024, after which its bancassurance products were distributed through two partners: TC Advisors (TCA) and AIA. “The single-digit growth mainly stems from the high base of the previous year and ongoing challenges in the insurance and letter of credit sectors,” Techcombank stated.

This divergence in income structure is also evident among commercial banks with extensive ecosystems, as well as in the Big 4 MB group. For example, MB recorded a 7% increase in service income, reaching over VND 4,368 billion, thanks to higher revenue from payment services, treasury operations, and other service fees. In contrast, Vietcombank’s non-interest income fell by 6% year-on-year, but its overall profit remained industry-leading due to higher interest income.

Investing for a New Phase

Despite disparities and challenges in bancassurance and other service-related income streams, banks continue to invest in and expand their ecosystems as part of their long-term business strategies. They are also positioning themselves to capitalize on the growing trends in asset and wealth management to further diversify revenue.

In the bancassurance segment, VPBank’s acquisition and development of OPES, as well as Techcombank’s establishment of a non-life insurance company following its split from Manulife, highlight banks' expectations for this market.

Notably, ecosystem expansion also involves integrating service providers to develop closed-loop financial products. Many banks that own securities companies are reinforcing their transition towards wealth management, reflecting their ambition to enter this lucrative market—valued at an estimated $600 billion by 2027, according to McKinsey experts. Among the leading banks, VPBank acquired VPBankS, Techcombank owns TCBS, MB owns MBS, LPB has LPS, TPBank operates TPS, ACB owns ACBS, and HDBank controls both HDS and VikkiBank, along with VikkiBankS. Additionally, SeABank owns Asean Securities, and several banks have partnerships with financial companies or fintech firms.

According to VDSC, the two key growth drivers for the banking sector in the 2025 forecast remain strong credit growth (interest income) and reduced credit costs. However, VDSC also noted that disposable income growth among consumers has not yet fully recovered. In principle, this could partially limit banks’ ability to increase service fee income.

Asset and Wealth Management

While some banks' private banking operations have demonstrated initial success, the market continues to misunderstand and abuse these two notions, according to Ngô Thành Huấn, CEO of FIDT, who commented on the investment methods banks are using to capitalize on trends in asset and wealth management.

For instance, asset management entails committing client funds for cash, stocks, bonds, and real estate assets in order to generate investment growth and returns. Domestic companies like VinaCapital and Dragon Capital, as well as international companies like BlackRock Inc. and Vanguard Group, are experts in this field.

On the other hand, wealth management has a broader scope, akin to a "general practitioner" requiring more extensive knowledge and vision. However, the readiness of banks to invest in specialized personnel for both asset and wealth management remains inadequate. While banks are expanding their ecosystems—including securities companies and bancassurance—to offer multi-service solutions to customers, their approach remains heavily focused on product sales (Product Push) rather than prioritizing customer benefits and value (Client-Centric). This could pose risks to market stability and customer trust in the future.