Instead of the modest contribution made previously, the insurance business segment, or bancassurance (banks co-operate with insurers to sell insurance products), has now become the main source of income from service activities for many banks.

A strong rise in bancassurance business helps MBBank's revenue
from services surge by 86 per cent in H1 2019. (Photo MBBank) 

For the Military Commercial Joint Stock Bank (MBBank), revenue from services in the first half of this year surged sharply by 86 percent over the same period last year to more than 1.81 trillion VND (77.68 million USD).

MBBank’s impressive result was mainly thanks to the strong rise in its bancassurance business, which contributed about 60 percent to the bank’s total profit from service activities.

 The good performance in the service business segment, together with credit, helped MBBank earn pre-tax profit of nearly 4.88 trillion VND in H1 this year, up 27.3 percent year-on-year.

 The same trend was also reported at the Tien Phong Commercial Joint Stock Bank (TPBank). While income from the bancassurance service in Q1 last year contributed only 17 percent to the bank’s total service revenue, the ratio surged to 31 percent in Q1 this year. 

 Bancassurance became the strongest-growing service business segment for TPBank in Q1 2019 when it increased five times over the same period of last year, from 17 billion VND to 86 billion VND.

 The high growth momentum continued for TPBank in Q2 2019. The rise helped the bank’s income from bancassurance reach more than 249.4 billion VND in the first half of the year, which doubled that in the same period of 2018 and accounted for 41 percent of the bank’s total service income.

 The contribution of bancassurance helped TPBank gain profit of 1.62 trillion VND in H1 this year, an increase of 1.5 times over the same period of 2018.

 The bancassurance business segment was also the biggest earner at the Vietnam International Commercial Joint Stock Bank (VIB) as it is a big partner of insurer Prudential Vietnam. VIB distributes more than 75 percent of Prudential Vietnam’s bancasurrance products. VIB’s profit from services in H1 2019 skyrocketed by 142 percent to 764 billion VND in H1 2019.

 For the Asia Commercial Joint Stock Bank (ACB), the bank estimated to earn some 350 billion VND from bancassurance in H1 2019, 2.5 times higher than the same period of 2018. The result helped the bank rank fourth in revenue and second in profitability of bancassurance services on the nation’s bancassurance market.

 In 2019, the bancassurance segment is expected to bring revenue of roughly 600 billion VND for ACB, three times higher than last year. The bank is also considering further cooperation with more insurers in 2020 to further cash in from the potential business segment.

 According to experts, revenue from service activities, particularly bancassurance, will be continually on the rise and considered as the ‘goose that lays golden eggs’ of many banks in the future.

 Analysts from the Saigon Securities Incorporation (SSI) forecast insurance premiums through bancassurance will grow by about 30-40 percent this year. It will also become one of the most preferred sales channels of the insurance market, contributing 14 percent to total insurance premiums.

 Experts also said increasing profit from service fees in general and bancassurance in particular is the right strategy of banks in the context that the central bank is increasingly tightening credit growth.

 According to banking expert Nguyen Tri Hieu, the bancassurance channel has high growth potential, given the rising number of middle and high income earners and better awareness on insurance of local people.