General Director of DongA Bank, Mr. Tran Phuong Binh, talks about the tough times in the banking sector and what the future holds.
Many people in the banking industry say it’s a career full of pressure and risk, and you yourself have experienced failure. What is it about the industry that holds your interest? If you could go back in time, would you still choose a career in banking?
I think this is what society assigned me to work in so I accept it, and it’s also a job I quite like. I consider DongA Bank to be like my child, so I am willing to devote my life, my mind, and my strength to it, accepting the difficult challenges to make my child healthy. And when there is love and passion any obstacle can be overcome. I would certainly choose this career again.
In the last few years, because of the difficulties in the economy as a whole, DongA Bank hasn’t been able to escape from the hardships and I have the responsibility to put that right.
The bank is currently restructuring and in about two years we will have a team of successors that will take the bank forward.
In 2013 you said that in 2015 there would be a new General Director. But then you announced you were staying in the position for two more years. Is this because the requirements of the position are so high or do you want your children to inherit the position?
DongA Bank is not a business my ancestors gave me so I am just not trying to cling on to it. I don’t put pressure on my children, and respect whatever career decision they may make.
Working in the banking industry is stressful, so the standard I set for people working in the industry is wisdom, knowledge, and bravery. If they fail, they will feel encouraged to start over again. I believe the team that will inherit DongA Bank need training and nurturing for five to seven more years.
Mr. Le Tri Thong had experience in many positions at a Dong A Bank subsidiary before I assigned him as General Director. He had the ability, ethics and knowledge but due to health and family reasons he moved on to another job.
DongA Bank’s debts have increased to VND7 trillion ($321.16 million), while its bad debt ratio is relatively high. It’s recording losses and has been inspected by the State Bank of Vietnam (SBV). Are you concerned about the bank’s brand name? What is your strategy for DongA Bank to turn the losses around and reduce its bad debts?
In the 2010-2012 period DongA Bank’s business experienced many difficulties, as interest rates fluctuated from 17-19 per cent per annum and even fell to 14-15 per cent, which was good for society but made life hard for enterprises since the cost of loan repayments went up, with enterprises that had invested in the property market suffering significantly.
Many factors came together to increase the bad debt ratios at commercial banks and at Dong A Bank.
Last year we sold part of our bad debts to the Vietnam Asset Management Company (VAMC), increased our presence in the retail banking market, which saw our outstanding credit in the sector increase to over VND1 trillion ($45.88 million), but outstanding credit in the corporate sector decreased.
Credit growth continued to be in the negative compared to 2013, and the bank didn’t earn any profit due to financial sources being focused on handling bad debts.
Our target was to secure our operational safety, even if we had to sacrifice profit.
The SBV inspection was a regular process, not because the bank was experiencing problems.
This year DongA Bank continues with its strategy of managing its bad debt ratio at less than 3 per cent under guidance from the SBV, in particular being active in debt collection and selling debts to VAMC. We will also develop corporate banking.
In order to grow our credit we will keep developing the individual customer segment and find strategic shareholders, as we expect to increase our capital this year by inviting both local and international investors to inject resources into the bank’s future development.
Many banks have merged recently or are planning to do so, including DongA Bank. Is the SBV encouraging this to happen?
As Vietnam reforms from a centrally-planned economy to a market economy the demand for capital has increased, so banks also need to expand to adapt to the needs of the capital market and create the conditions for individuals to deposit their savings.
With a lot of banks comes a lot of competition and large banks are in a better position to thrive, putting smaller banks at a disadvantage.
Many of these small banks, however, are going concerns so mergers are quite natural. The most important thing in a merger is that it is voluntary, with both sides feeling they will benefit.
Regarding DongA Bank, even though its bad debt ratio is relatively high it’s an issue that we can overcome. In order to follow the guidance from SBV, however, after analyzing our position we felt the need to increase our financial capacity and expand our network to increase our competitive advantage.
At the beginning of this year ABBank proposed a merger with DongA Bank. We still need to consider our position, but of greatest importance is keeping the DongA Bank brand.
What is the greatest pressure that comes from competition?
The biggest asset of a bank is its loyal customers, so in the context of significant competition the care and attention given to existing customers is of extreme importance yet also the source of the greatest pressure.
Retaining customers is not just about offering them favorable interest rates and services but also about catering to their needs, showing them that the bank is concerned about their financial circumstances and wishes to be their companion over the long term.
Source: Doanh Nhan Sai Gon