Local banks earn high profits from bancassurance activities
Local credit institutions are enjoying a rise in bancassurance activities with more exclusive deals coming,
The financial picture of the banking group in the first quarter of this year, in addition to the slowing rate of profits, high bad debt, and the decline of the insurance segment - the field considered the "golden egg" sector in recent years.
Regarding margin, International Bank (VIB) and Tien Phong Bank (TPB) saw the biggest declines. In the first quarter of this year, TPBank's business, insurance and consulting service fees were recorded at more than VND 116 billion, down by half compared to last year. Similarly, VIB's insurance commission revenue decreased by nearly 50%, from 214 billion VND in the first quarter of 2022 to 118 billion VND.
MB - the leading bank in insurance activities without an exclusivity agreement - also recorded a revenue drop of more than 10% in the first quarter of this year. In both life and non-life segments, this bank directly owns two insurance companies, MIC (MB owns 68.37%) and MB Ageas Life (61%).
With a smaller scale, the decrease of SeaBank with this segment was also recorded by more than 50%. Revenue from insurance agency services of this bank was just over 22 billion dongs in the first quarter of this year, compared to nearly 50 billion dongs in the same period last year.
Some other banks have exclusive agreements on insurance distribution but did not disclose details of this segment's revenue in the first quarter.
Photo: net interest on services and insurance of some banks
The decline in the insurance segment is part of why many banks' service revenue is lower than in the same period.
Among 27 banks listed and traded on the stock market, 11 banks recorded a decline in net profit from services in the first quarter of this year, including MBB, SeaBank and VIB - the banks that recorded revenue from services. Insurance revenue decreased.
MB's net profit from service activities was only nearly 700 billion dongs in the first three months of this year, compared to 1,100 billion dongs in the same period last year. Vietcombank, SeaBank, and Sacombank ranked first, with a 47-57% decrease. NCB alone is the only bank with a net loss from service activities.
For TPBank, despite the sharp decline in the insurance segment, the bank still recorded a 36% increase in net profit from services over the same period, thanks to revenue from payment services and other activities. Similarly, other banks have increased service activities in the first quarter, such as VPBank, VietinBank, SHB, BIDV or HDBank.
Bancassurance, a combination of banking and insurance terms, has recently been considered a "gold mine" for banks. Cross-selling helps insurers exploit large customer files from banks, minimizing expansion costs, while banks increase revenue and take advantage of customers buying insurance to promote other services.
In the first half of 2022, insurance premium revenue alone through the Bancassurance channel accounted for 41% of the total net revenue of insurers. This ratio is forecasted soon to reach 50% of total new mining revenue, helping the bank surpass agents to become the main money-making channel for insurance companies.
Along with prepaid fees of trillions of dong, high commission rates are sales pressures (KPIs) that banks have to respond to insurance companies. This pressure is transferred to the people who do the insurance advice - the teller or the credit officer.
Last year, many people reflected that bank loans were required to be accompanied by insurance. Some customers also said that they were improperly advised, leading to spending money to buy insurance disguised as "investment savings" products.
Earlier this year, the context of selling insurance through banks exposed many problems. Some banks removed the name of the KPI of insurance sales, instead calling it a different or general calculation into the fee KPI.
At one of the leading private banks in the market, the life insurance sales target was replaced by the "net fee revenue", calculated from the fees for credit products, business loans, consumer products and services, and use and sell insurance. At another private bank, the target of "collecting fees from insurance sales" was changed to "collecting fees for financial advice".
