Sacombank's "dual" goals on the path to sustainable development

Sacombank is ready for a sustainable development journey after restructuring.

Sacombank's attitude towards bad debt plays an important role in restructuring.

Moody's recently upgraded the bank's credit rating in many categories, thanks to the significant handling of bad assets, helping to improve asset quality, profitability, mobilization and liquidity.

The restoration of Moody's credit rating to pre-merger levels is one of the important criteria to look at Sacombank's restructuring roadmap. Recalling the period of 2016, this rating agency downgraded the bank in the context of the merger with Phuong Nam Bank and the beginning of the restructuring project.

It was a difficult period for Sacombank despite the significant increase in post-merger scale. Business activities still grew, but the need to set aside provisions for bad debts after the merger caused profits to decline, many safety indicators were below the prescribed standards, the bank's reputation and brand were also affected, greatly affecting partners, customers and employees.

After developing and submitting the Self-Restructuring Project to the State Bank for approval, Sacombank established a Debt Settlement Steering Committee to monitor each file, handle bad debts publicly, transparently and ensure the interests of both the bank and customers.

The second group of solutions is to restructure the operating model, separate and improve the management - operation - supervision capacity according to Circular 13, and at the same time apply advanced management practices and international standards to the risk management system.

In addition to governance, the third group of solutions is to promote the recovery of business activities, restructure capital sources and lending activities in a safer direction to create financial resources to gradually handle outstanding issues. Banks also promote comprehensive digital transformation, enhance professional governance and continuously innovate products and services.

In fact, these three groups of solutions have brought positive results. The ratio of outstanding assets to total assets continues to decrease sharply, to 3% by the end of 2023, from the figure when the project was first launched, which was 28.1% in 2016.

Last year alone, figures show that the bank recovered and processed an additional nearly VND8,000 billion, of which nearly VND4,500 billion were items under the restructuring plan. Sacombank also made full provisions as required, with a total risk provision balance of up to VND25,099 billion, of which 100% was made for the entire portfolio of unprocessed VAMC debts.

Assessing Sacombank's bad debt handling process, Associate Professor Dr. Nguyen Huu Huan, Head of the Financial Market Department, Ho Chi Minh City University of Economics, said that the above achievements have shown the high determination of the bank's leadership, especially in the context that the previous restructuring plan did not take into account the difficulties of the market in recent years (such as Covid-19, geopolitical tensions or the general increase in bad debt of the market...).

At the same time, the lesson from Sacombank shows that the attitude towards bad debt plays a very important role in restructuring banks. Besides changing management factors, bad debt handling has a huge impact on the business operations and balance sheet of the bank.

The case of Sacombank also shows a clearer direction for handling weak banks through mergers. In fact, mergers have never been easy because not only do bad debts increase dramatically, but also because of the harmony in the story of governance and management after the merger. "The problem is how to combine good banks with bad banks to become good banks? The harmony factor is very important," Mr. Huan emphasized.

Focus resources, restore position

From the perspective of investing in bank stocks, Sacombank is considered a "promising star" in terms of business growth potential after completing the restructuring project.

Sacombank focuses resources on restoring position

Previously, the analysis team of SSI Securities Company commented that if Sacombank continues to maintain its bad debt handling speed and good business efficiency, the comeback will be very impressive.

Similarly, according to Mr. Huan, Sacombank's transformation from a bank with a high bad debt ratio to a low level, possibly even lower than 3% while the industry-wide ratio is above 3%, is a very remarkable achievement. "If debt is handled well, Sacombank can open a new era, an era in which shareholders will benefit from the bank's profit results," said Mr. Huan.

Sacombank's consolidated pre-tax profit in 2023 reached VND9,595 billion, up 51.4% and completing 101% of the set plan. Profitability indicators such as ROA and ROE reached 1.22% and 18.30% respectively, much higher than the 2022 level (0.31% and 4.47%).

This shows that Sacombank's basic business activities are still improving significantly, despite the context of increasing bad debts in the whole industry and low demand in the international and domestic markets. The increased profit scale also shows that the bad debt handling activities are gradually coming to the final stage, at the same time helping the financial structure of the bank to become more and more solid.

Sacombank's retained earnings after setting aside funds by the end of 2023 were at VND18,387 billion, nearly equal to its charter capital. The issue of dividend distribution is therefore always a major concern of this bank's shareholders at each shareholder meeting, when looking at the increasingly large retained earnings. The source of funds for dividend distribution is available, the remaining issue is the timing of the distribution. The bank's senior leaders have shared many times that the necessary procedures have been submitted by Sacombank to the State Bank, and dividends will be distributed to shareholders immediately after approval.

According to Mr. Huan, the dividend policy generally depends on each company, but even if there is no dividend, the shareholder value will not be lost, but will still be in the shares, the later the dividend is, the higher the value. In the case of Sacombank, even if it wants to divide but the State Bank has not approved it, it cannot be done. "If the bank finishes handling outstanding debt and makes full provisions, the retained profit is the shareholder's profit. The problem is patience, loyal shareholders, the longer they stay, the greater the reward", Mr. Huan assessed.

The internal strength consolidation continues to be promoted with increasingly higher goals. The bank has just announced the completion of the implementation and application of Basel III at the end of last year. The project to implement International Financial Reporting Standard No. 9 (IFRS 9) is still on schedule. When completed, Sacombank will be among the pioneering banks applying accounting standards to help banks classify, evaluate assets and prevent risks better.

Sacombank is also not behind in the story of digital transformation, an activity that the bank has always devoted resources to deploy throughout the system in the context of implementing the restructuring project over the past 7 years. The comprehensive digital transformation solution group also shows "sweet fruit" with its position in the top banks leading in digital transformation, pioneering the launch of many modern, multi-utility products that are highly appreciated for their experience and safety. Most recently, the Bank launched a new generation of customer care switchboard applying artificial intelligence (AI), along with a modern STM transaction machine system where customers can use voice and touch interaction to make transactions... "Digital transformation is not simply new technology projects but requires changing mindsets, changing business models and processes, improving digital skills and capacity in the organization to be successful" , Ms. Nguyen Duc Thach Diem, General Director of Sacombank, once emphasized.

Customers experience STM machine

Towards sustainable development

An interesting point is that, in addition to the short-term goal by 2025 of completing the restructuring project and soon returning to the leading retail position, Sacombank also sets the next long-term goal as a story of sustainable development, in the context of the Government aiming to achieve net zero emissions (Net-Zero) by 2050. The bank has also launched a new strategy that includes four key pillars for sustainable development. Sustainable growth: bringing long-term benefits to shareholders, customers, communities and the country; Customer-centricity: products and services always revolve around the customer's first interests; Human resources are the driving force for development: 99% of managers are promoted from internal resources; Transparent governance: clear organizational structure, risk management is a priority and always aims at the latest international standards.

Source: https://nld.com.vn/muc-tieu-kep-cua-sacombank-tren-lo-trinh-phat-trien-ben-vung-196240502093447427.htm