Digitization, data scale-up, talent development key to Techcombank’s transformation

By Thai Ha
Sun, May 22, 2022 | 9:52 am GMT+7

As the recovery of the Vietnamese economy gathers pace in 2022, Techcombank’s investments in its digital platform, data analytics and talent development have laid a strong foundation to capitalize on growing demand for banking services, says Jens Lottner, CEO of Techcombank.

Jens Lottner, CEO of Techcombank. Photo courtesy of the bank.

Jens Lottner, CEO of Techcombank. Photo courtesy of the bank.

Techcombank recorded strong profit growth in 2021. Does the 16% target for 2022 seem too cautious?

From 2015 to 2021, our profit profit before tax grew at a compound annual growth rate (CAGR) of around 50%. As we scale, the bank will reach a size where it won’t be possible to grow at 50% every year. We set a target of 16% which we feel is highly achievable and note that this still means VND4 trillion ($172.6 million) more than last year.

Is more than that possible? Yes certainly, we could achieve 40% growth this year if Vietnam’s economy continues to recover and the tailwinds are favourable, but not everything is in our control.

How about your $20 billion market cap target by 2025? Isn’t the market correcting?

If you see our current trajectory, the way our earnings are increasing and the potential for growth as the Vietnamese economy recovers, I think at the end of 2025, we could easily reach around $8 billion in equity value. And our pre-tax earnings could be above $2 billion if we continue on our current growth trajectory.

If you have these numbers, the question is then on what multiples are we trading? If you look at banks across the region that are showing the types of numbers we have in terms of the growth and return on assets, they usually trade at 3-4 times book. Based on these multiples, we are ahead of our plan. We achieved what we wanted for 2022 already in 2021.

To get there, you seem to be betting big on technology. Please take us through your technology investment.

One of the priority areas in which we are investing is our transaction banking capability through our digital mobile app. We want to bring differentiation to the app through the application of data analysis, so for example, if you are a new-to-bank customer we can still underwrite you by quickly developing a credit score that uses up to six external data sources.

The ability to interact with customers, understand them, and provide tailored financial solutions to meet their needs through our app, just as we would do in a branch, is the customer experience we want to create. Our plan is to have 5 million customers migrated completely onto the digital platform by the end of this year. We currently have around 400 people working on enhancing these digital capabilities.

We have set aside $500 million for tech investments over the next five years. Up to now, we have deployed around 15% to 20% of that total amount, but we expect to see an acceleration of our investment in the years ahead as we implement larger scale technology initiatives. We are committed to deploying this capital responsibly and in ways that will help to transform the bank, make us more efficient and give our customers the best digital experience possible.

Within the tech categories, Techcombank seems to be very aggressive in data. We’ve heard you’re building a data lake, can you tell us more?

Our data lake initiative involves collecting and aggregating data from different areas in the bank, and because it's so big, we have decided to put this ‘data lake’ on the cloud. We have identified the data set we want to store in the cloud, and around 70-80% of the data has now been transferred.

We are also building an analytics infrastructure to enable us to analyze the data to better understand our customers, provide a more holistic view of their needs, and enable the bank to make better and faster decisions over the types of products and services to offer. The next step will be to connect our app to the data lake infrastructure so that we make better decisions across all of our customer engagement channels.

What makes Techcombank's mobile app different from those of other other banks?

We want our mobile app platform to not just to be a service platform, but to have the feeling of a real human interaction that understands what a customer needs. That human interaction, when it comes at the scale of 15 million or 20 million customers, will only work if you connect a lot of different elements, from infrastructure, to data systems and front end systems and employ machine learning.

We also want to provide customers with an experience that is seamless across our different channels, from the branches to our digital platform. There is probably only a handful of banks in the world that are anywhere close to offering this type of seamless experience for their customers and I think it will be a focus for many banks for the next 10-15 years. Look at Google, every single time more people are using it, it learns more and becomes even better. It's a virtuous cycle that is very hard to replicate.

What do you make of the level of digitalization by Vietnamese banks, compared to others in the region? What changes need to be made in terms of regulations when it comes to data protection in the cloud?

I think we are 5 to 10 years behind compared to where banks in other markets are, but we are catching up fast. The main differences are in the technology stack. How scalable are the systems? How easy is it to making changes and to create new capabilities? How long it takes to get to market? A lot of the systems used by Vietnamese banks are very tightly integrated and this makes it harder to create new customer experiences, compared to what we see in other markets.

In terms of the legal frameworks, I think that the local regulator, in certain areas, is much more open than others. For example, moving to the cloud would have been much more difficult in Singapore, Thailand or in Malaysia. People might say maybe we are too laxed with data privacy, but that's not true. If you look at how much money AWS, Google and Microsoft are investing to strengthen their data protection, it's much safer to be up in the cloud than somewhere in a local data center. From that perspective, I think the regulator has the right perspective in terms of what they are intending to do.

However, probably some of the legal frameworks need to be enforced. If there is a stronger sandbox regime, where people can test things in a lot of areas, it would be much more helpful. Through this sandbox regime, and through working with the banks, we could come up with the solutions. If the banks can make the right case, regulators are willing to entertain us. It can be only on a pilot level in the beginning, but regulators understand that they need to do something.

Throughout your transformation process, you’re beefing up the team with a lot of overseas hires. How will it change the bank performance?

There are certain skills and capabilities we need, which we believe are not in country. But everyone who's coming here has a very clear mandate to pass down his or her experiences to the staff. Ultimately, we will not be able to rely on constantly importing talent. Within Techcombank, we're not making such a big differentiation between local and foreign experts, or returning overseas Vietnamese. A lot of the people we're having now are really building a career with the bank.

On the other hand, as we start transforming, our aspiration is to become one of the leading banks in ASEAN. So for a lot of experts, this becomes a very different proposition for them. They are excited by the growth, and the quality of work and the people they're working with.

In 2021, the bank posted VND37.1 trillion (over $1.6 billion) in total operating income, up 35.4% year-on-year. Its profit before tax rose to VND23.2 trillion ($1 billion), making Techcombank the first non-state-owned lender to join Vietnam’s “billion-dollar profit” club. This achievement was the culmination of five consecutive years of double-digit profit before tax growth, at a compound average growth rate (CAGR) of an impressive 50% between 2016 and 2021.

Despite pandemic-induced challenges, Techcombank grew its total assets by 29.4%, to VND568.7 trillion ($24.54 billion), and delivered "industry-leading" return on assets of 3.7% according to the bank. It was also able to maintain an impressive current account and savings account (CASA) ratio, which reached 50.5% at the end of 2021. Its capital adequacy ratio (CAR) was 15%, while the non-performing loans ratio (NPL) stood at 0.7%, and the loan loss coverage ratio (LLC) fetched 162.9%.

Comments (0)
  • Read More
Germany’s household product firm QuickPack to invest $32 mln in Vietnam

Germany’s household product firm QuickPack to invest $32 mln in Vietnam

Germany’s QuickPack, a specialist for household goods and hygiene products, will invest €30 million ($31.8 million) in Vietnam’s Mekong Delta province of Long An.

Industries - Tue, November 19, 2024 | 4:24 pm GMT+7

Malaysian millionaire willing to invest in convicted Vietnamese tycoon’s property project: lawyers

Malaysian millionaire willing to invest in convicted Vietnamese tycoon’s property project: lawyers

Malaysian millionaire Vincent Tan has evinced investment interest in a residential project owned by convicted tycoon Truong My Lan, chairwoman of Van Thinh Phat Group, lawyers for the latter have disclosed.

Real Estate - Tue, November 19, 2024 | 4:17 pm GMT+7

‘Bottleneck of bottlenecks’ continues to dog Vietnam's property, infrastructure projects

‘Bottleneck of bottlenecks’ continues to dog Vietnam's property, infrastructure projects

Limited consultations between state agencies and the parliament’s primary focus on wording are issues with Vietnam’s legal framework adversely affecting property and infrastructure projects, say experts and corporate leaders.

Economy - Tue, November 19, 2024 | 3:40 pm GMT+7

Xi hastens construction of 3 Vietnam-China rail routes

Xi hastens construction of 3 Vietnam-China rail routes

Chinese President Xi Jinping has called for more substantial cooperation between China and Vietnam, including the pacier implementation of three railway routes linking the two nations.

Infrastructure - Tue, November 19, 2024 | 3:08 pm GMT+7

Vietnam developers offer deferred principal payments, interest support to boost year-end sales

Vietnam developers offer deferred principal payments, interest support to boost year-end sales

Vietnamese housing developers are offering several incentives including deferred principal payments and interest support to stimulate demand and boost liquidity as the year nears its end.

Real Estate - Tue, November 19, 2024 | 2:29 pm GMT+7

Australia's EQ Resources acquires TMG Group with Vietnam-based ferrotungsten factory

Australia's EQ Resources acquires TMG Group with Vietnam-based ferrotungsten factory

Australia-based EQ Resources Limited has acquired its fellow firm Tungsten Metals Group (TMG), which owns and operates the largest ferrotungsten (FeW) factory outside China.

Companies - Tue, November 19, 2024 | 11:00 am GMT+7

Techcom Securities becomes largest broker in Vietnam by capital base

Techcom Securities becomes largest broker in Vietnam by capital base

Techcom Securities JSC (TCBS) has become the largest securities company in Vietnam by charter capital after finishing a rights offering last week.

Finance - Tue, November 19, 2024 | 9:11 am GMT+7

Vietnam airport operator ACV looks to better exploit non-aviation service potential: exec

Vietnam airport operator ACV looks to better exploit non-aviation service potential: exec

Vietnam's airports operator ACV expects to earn $145 million from non-aviation services this year, accounting for around 18.83% of its total revenue, which is modest compared to other countries, said deputy general director Nguyen Duc Hung.

Companies - Tue, November 19, 2024 | 7:45 am GMT+7

The Investor to host seminar on removing legal bottlenecks for infrastructure, property investment

The Investor to host seminar on removing legal bottlenecks for infrastructure, property investment

A seminar themed “Removing legal bottlenecks for infrastructure and property investment” will be organized by The Investor in Hanoi on Tuesday.

Companies - Tue, November 19, 2024 | 7:00 am GMT+7

Indonesia promises Asia-Pacific investors more incentives

Indonesia promises Asia-Pacific investors more incentives

Indonesian President Prabowo Subianto recently told the press that he will create more incentives and expand special economic zones (SEZs) so as to lure investors from Asia-Pacific.

Southeast Asia - Mon, November 18, 2024 | 11:01 pm GMT+7

Indonesia, Brazil enhance aviation cooperation

Indonesia, Brazil enhance aviation cooperation

Indonesia's state-owned aircraft manufacturer, Dirgantara Indonesia (DI), and Brazilian aerospace company Embraer have signed a memorandum of understanding (MoU) to expand collaboration in the commercial aviation sector.

Southeast Asia - Mon, November 18, 2024 | 11:00 pm GMT+7

Indonesia eyes to become member of BRICS

Indonesia eyes to become member of BRICS

Indonesian President Prabowo Subianto has shown his country’s desire to become a member of the BRICS - the alliance of major emerging economies initiated by Brazil, Russia, India, China, and South Africa.

Southeast Asia - Mon, November 18, 2024 | 10:57 pm GMT+7

Former Party chief, chairman of Vinh Phuc province face disciplinary action

Former Party chief, chairman of Vinh Phuc province face disciplinary action

Vietnam’s Central Inspection Committee has proposed disciplining Pham Van Vong, former Party chief of Vinh Phuc, and Phung Quang Hung, former chairman of the northern province, for violations related to Phuc Son Group.

Politics - Mon, November 18, 2024 | 9:17 pm GMT+7

Shaping a waterway into a key shipping channel: Viconship gets dredging nod

Shaping a waterway into a key shipping channel: Viconship gets dredging nod

A major dredging project will allow safer ship navigation and increased cargo transportation capacity on the Hai Phong shipping channel, thereby enhancing competitiveness of Vinconship’s port system, says the company.

Companies - Mon, November 18, 2024 | 7:08 pm GMT+7

Former assistant to State President appointed general director of state-owned financial firm HFIC

Former assistant to State President appointed general director of state-owned financial firm HFIC

Truong Tuan Anh, an official at the State President Office and former assistant to a state president, has been appointed general director of Ho Chi Minh City Finance and Investment Stated-owned Company (HFIC).

Companies - Mon, November 18, 2024 | 5:35 pm GMT+7

MBBank’s takeover of weak OceanBank to have limited impact on its credit profile: Fitch

MBBank’s takeover of weak OceanBank to have limited impact on its credit profile: Fitch

Military Commercial Joint Stock Bank's (MBBank) takeover of Ocean Commercial Bank Limited (OceanBank) will have limited financial impact on the former’s credit profile, Fitch Ratings said Monday.

Banking - Mon, November 18, 2024 | 5:06 pm GMT+7