Techcombank:sustained IT investment for sustained competitive outperformance

SynopsisVietnam Technological and Commercial Joint Stock Bank (Techcombank), a Temenos customer since 2001, has always held technological innovation to be critical to the success of its business. This progressive attitude towards technology has underpinned Techcombank’s consistently high IT investment and has provided the source of enduring competitive advantage that, in turn, has seen Techcombank grow revenue, loans and profits faster than its competitors, while continuing to improve efficiency, customer service and risk management.

With the case study, we aim to demonstrate in practical and quantifiable terms the impact that Techcombank’s sustained investment in T24, its core banking application, has made in the areas of customer satisfaction, product innovation, operational efficiency and risk management. Throughout the study, we also aim to benchmark Techcombank’s performance against its domestic and international peers to illustrate its comprehensive outperformance in recent years.

Case Study

Main Findings•SincegoinglivewithT24in2003,Techcombankhasbeenthefastest-growingbankinVietnam,recordingarevenue CAGR of 87% over the period;•Thecustomer-centricnatureofT24hasenabledTechcombanktotailoritsservicetoindividualcustomers, translating into the highest customer rating of any Joint Stock Bank and more than 25% annual growth in revenue per customer over the last two years;•TheflexibilityinT24toconfigurenewproductshasseenTechcombankout-innovateandoutmanoeuvrecompetitors and, in doing so, grow its deposit base at a CAGR of 72% over the last five years, more than twice the rate of the overall market;•TheinherentscalabilityofT24,coupledwithitsgrowingusagethroughoutthebank,hasledtosignificanteconomies of scale in IT: IT cost to income, for instance, is 84% below the industry average; •Despiteitsexceptionalgrowth,acompleteviewofthebank’sriskexposureatboththeclientandaggregatebank level has allowed Techcombank to control risk successfully: while loans grew by 199% between 2006 and 2008, the percentageofnon-performingloansactuallyfell;•Between2003and2008,Techcombank’soperatingprofitgrewatacompoundannualrateof111%,alsofasterthan any other bank in Vietnam.

About Techcombank 2

Partnering with Temenos for core banking software 4

•The need for a new system 4

•Initial selection and implementation 4

•Sustained investment 5

Where Techcombank has outperformed and how technology has facilitated this 6

•Overview 6

•Product innovation 6

•Customer service 8

•Operational efficiency 10

•Risk management 11

Summary 12

Appendix 13

•Glossary of abbreviations 13

•Authors, Further contact, About Temenos 13

•Disclaimer 13

Contents

Retail Banking

Corporate & Correspondent Banking

Universal Banking

Private Wealth Management

Islamic Banking

Microfinance & Community Banking

About TechcombankVietnamTechnologicalandCommercialJointStockBank(Techcombank)wasfoundedinHanoion27September1993withaninitialregisteredcapitalofVND20billion.ThatthisnumbernowstandsaboveVND3,200billion(a160-foldincreaseoraCAGRof45%)givesanindicationoftherapidgrowththatthebankhasexperiencedsinceitsestablishment.

Over the last five years, Techcombank has grown deposits, revenue and operating profit faster than any other bank in Vietnam. At the endof2008,Techombankwasthe7thlargestVietnamesebankbyassetsize(the3rdlargestJointStockBank),butwasthe5thmostprofitable in absolute terms, underlining its much higher return on assets .

Techcombank’s success has attracted attention outside of Vietnam. In 2005, HSBC took a 10% strategic shareholding in the bank, whichitincreasedsubsequentlyto15%in2007andthento20%in2008(themaximumpermittedbyVietnameselaw).Theinvestmenthasbroughtnewmanagementexpertisetothebankaswellasafasteradoptionofinternationalbankingpractices.

At the end of 2008, Techcombank employed 4,041 full time employees across its nationwide network of 169 branches and transaction offices.

Major banks in Vietnam by asset growth (5 year % CAGR to 2008)

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Recent branch opening ceremony

Source:Companyannualreports,Reuters,TheBankerDatabase,brokernotes Source:Companyannualreports,Reuters,TheBankerDatabase,brokernotes

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Techcombank established in Hanoi

Head office moved to larger location in Hanoi; branch networkexpandedtocoverthreemainregionsinVietnam

Signs agreement with Temenos for core banking software

Arebrandingexercise,startedtheyearbefore,iscompletedandnew logo is launched

HSBC takes a 10% strategic stake

Wins several awards, including the international award for payments from Bank Of New York, Citibank and Wachovia

First Joint Stock Bank to receive Moody’s rating

A series of new products launched, including first multifunctional savings product

HSBC increases stake in Techcombank to 15%

Wins award for “Top Trade Services 2007” from the Ministry of Industry and Commerce

HSBC increases its stake to 20%

Diversifyingintoassetmanagement,withthelaunchofTechcombank AMC (Asset Management Company)

A series of innovative products released, including collaborative ventures with Vietnam Airlines and Bao Viet Insurance

Wins several awards, including “the Most Satisfied Services in 2008” voted by readers of Sai Gon Tiep Thi magazine; “The Top Joint Stock Company of Vietnam” given by the securities committee; and, the “Golden Start Award” from the Association of Young Enterprises

Techcombank – selected milestones

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Partnering with Temenos for core banking software

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“T24 has both facilitated and cemented our technological leadership in this market”Le Xuan VU, CIO, Techcombank

Techcombank has always had big ambitions. In its mission statement, it sets out its intention of being the number one bank in Vietnam across a range of metrics – trust, quality, effectiveness.

Techcombank has, furthermore, always had a very progressive attitude towards technology. As its name suggests, technology is anintegralpartofthebank’smake-upandithasalwaysunderstoodtheimportanceoftechnologicalinnovationasameansofdifferentiatingitsbusinessand,byextension,asasourceofcompetitiveadvantage.

It was this combination of ambition and technological vision that resulted in Techcombank making the decision to replace its core banking system with a packaged solution from a foreign vendor, even though at this time such solutions were largely untested in the Vietnamese market.

The need for a new systemBeforerunningT24fromTemenos,Techcombankusedanin-housedevelopedsolutionthat,whileadequateforitsneedsatthetime,would have inhibited its ambitious future growth plans.

Techcombank’slegacysolutionconsistedof12separateinstancesofaFoxpro-basedaccountingsystem-oneateachbranch-whichwasusedformanuallyrecordingalltransactionsandwassupportedbyaseparateSWIFTandLocalClearingHousesystem(CITAD).

The first significant problem with this decentralised system was the quality and timeliness of management information. Because each branch had its own separate system, each branch had a separate close of day reconciliation. Management would only (and could only) see a complete view of the business once a month, when consolidated management accounts were prepared.

The second major problem with the system, and which precipitated Techcombank’s decision to replace it, was that it only offered single-branchbankingforcustomers.Thatis,acustomerwithanaccountinonebranchcouldonlyaccesstheaccountinthatsamebranch: trying to withdraw money or pay a bill at a different Techcombank branch was impossible.

Initial selection and implementationTechcombank ran a very detailed selection process, which lasted for one year and which considered both local and foreign vendors.

EventhoughTemenos,liketheotherinternationalvendorsinvitedtoparticipate,hadlittleexperienceinVietnam–Temenoshadjustone Vietnamese customer at the time, compared to 11 now – Techcombank wanted a solution that incorporated deep international bankingknow-howandwaspreparedtooverlooklackoflocalmarketreferences.

What impressed Techcombank about Temenos and T24 (then named Globus) and the reason the solution was ultimately selected ahead of the competing products was the following:

• As a single domain company, Temenos was felt to have the best banking knowledge;

• TemenosspendsmoreonR&Dthanitspeers,channelledintoanannualreleaseprogramme.Techcombankvaluedthis commitment to the product (and its clients);

• T24wasconsideredthemostflexiblesolutionandTechcombankwantedtobeabletomakethecustomisationsnecessarytomeet local requirements without modifying the core code, so that the system would be easily upgradeable; and,

• Techcombank was impressed with the user interface, which it felt was intuitive and easy to navigate

Before making its final decision, Techcombank visited Temenos’ development centre in Chennai to meet developers and understand more profoundly how the system worked.

The decision to take T24 was made late in 2001, the implementation project began in March 2002 and the product was live across all branchesbythe12thDecember2003.

Statement / Report Printing

T 24

Internet

External Access External Servicing Remote Acess

T24 Applications Interfaces Ancillary applications

Current IT System

T24issupportedbyjust3ancillaryapplications:TranswareCard,AvayaCallCentreandacontentmanagementsystem

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Sustained investmentSincegoinglivewithT24in2003,Techcombankhasmademultipleadditionalinvestmentstotheplatform,toupgradeitstechnologyandfunctionalityandtoextenditsusage.

• In2004,TechcombankupgradedtothelatestversionofGlobus,G13.ThistookateamfromTechcombank4months.• In 2005, Techcombank upgraded to the latest release of the software, which had been renamed to T24. This took a joint team from Temenos and Techcombank 2 months.

• In2006,TechcombankupgradedtothenextreleaseofT24,R05.AsTechcombankhadbythistimedevelopedgreaterexpertiseon the product, they were able to manage the upgrade using only internal resources and in just 2 months.

• In 2007, Techcombank – again without assistance from Temenos – upgraded to R07, which also included taking an additional module, for management reporting.

• In2009,TechcombankinstalledT-Risk,Temenos’solutionfortheBaselIIregulations.• Techcombank’snextproject,whichwillstartbytheendof2009andruninto2010,istoupgradefromR07toR09and,atthe same time, move from Temenos Internet Banking (TIB) to ARC Internet Banking.

“Techcombank is a sophisticated Temenos customer. They have developed a very high level of internal competence on T24, which enables them to upgrade withoutoutsideassistanceand,inaddition,allowsthemtoexploittheexistingfunctionality to run ever greater parts of the bank.”Chris Longden, Regional Director Asia Pacific, Temenos

Nguyen Duc Vinh CEO, Techcombank

Temenos T24 has enabled Techcombank to enjoy the extraordinary growth since its live date.

“”

Where Techcombank has outperformed and how technology has facilitated this

OverviewAs we shall show in the following sections, T24 has played a key part in Techcombank’s ability to outperform its competitors. T24 has enabled Techcombank to differentiate its customer offering, through more personalised service and more innovative products, which has allowed it to grow deposits so quickly and, in turn, assets and profits so sustainably. Moreover, the packaged nature of the software coupled with its pervasive use within the bank, has made possible the realisation of significant scale economies, which have sustained the level of operational improvement. Lastly, the complete view of risk afforded by T24 has permitted rapid growth in assets without any material deterioration in asset quality or the bank’s risk profile.

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Techcombank: clear outperformanceNote: The size of the bubble represents the banks’ asset size

Product innovationTechcombank’s superior product innovation has helped it capture an ever greater share of customer deposits – and, impressively, withoutsacrificingnetinterestmargins-whileitssuperiorcustomerservicehasengenderedloyaltyinitscustomerbaseand,inturn,hasmadethatdepositbaseextremelysticky.

EventhoughWesternbanksarelikelytorelytoagreaterextentthanbeforeoncustomerdepositsforfunding–asBostonConsultingGroup notes, “the battle for deposits has intensified”1-wholesalelendinghasonlyeverbeenaminorsourceofbankfundingInVietnam.Therefore,ithasalwaysbeenparamountforVietnamesebankstogrowcustomerdepositsasfastaspossible-andwithoutsurrenderingtoomuchinterest-inordertobeabletogrowassetsandprofitsquicklyandsustainably.

Mr Le Xuan VuCIO, Techcombank

Not only are we able to launch new products faster than competitors, but the flexibility of the system means that all of our processes are fully aligned to this new product. In contrast, even if a competitor reacts quickly and launches a similar product, this is likely to involve a significant amount of manual processing – until the system can be configured appropriately – resulting in much lower productivity.

“

”

1 “Living with New Realties: Creating Value in Banking 2009”, Boston Consulting Group, February 2009

Source:Companyannualreports,Reuters,TheBankerDatabase,brokernotes

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77%average growth in deposits since 2002, more than twice the market growth

According to Bao Viet Securities2, aggregate customer deposits grew at an average rate of 34% over the period 2002-2008.Over the same period, Techcombank grew its customer deposits by an average of 77%, more than twice the rate of the total market and significantly faster than most of its main competitors – see adjoining graphic.

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Deposit growth: Techcombank vs selected competitors, 5 year CAGR to 2008

What is more, this growth in deposits was not achieved by expensivepromotionsorbyofferingabove-marketinterestrates,as can be evidenced by the fact that the net interest margin (NIM) has been relatively stable over the period and, moreover, the existenceofagovernment-imposedceilingratefordepositsandloans also limits this kind of aggressive or promotional activity.

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Increase in Techcombank deposits in aboslute terms (LHS) and NIM (RHS)

The root of Techcombank’s success in growing deposits faster than competitors has been product innovation. While growth in brancheshasalsobeenvital(andT24hasfacilitatedthisbranchexpansioninthatithasallowedthebanktoleverageitsexistingITinfrastructure), most of the Joint Stock Banks have been growing their branch network at rates similar or higher than Techcombank.

TechcombankhastakenadvantageoftheflexibilityandparameterisationofT24tobuildinnovativeproductsandlaunchproductsquickly. The highly parameterised nature of the system allows Techcombank to create products without any assistance from TemenoswhiletheflexibilityofthesystemenablestheITdepartmenttoalignprocessesveryquicklytofittheproductspecifications.Techcombank has acted to reduce further the time it takes to launch new products by establishing a very tight working relationship between the product management team and the product implementation team. Now, it is possible for Techcombank to configure, test and launch a new product within 24 hours, although in practice, with User Acceptance Testing, the fastest a product has been launched to date is within 2 and half days.

“It is possible for Techcombank to configure, test and launch a new product within 24 hours”

Many of the products or promotions that Techcombank has launched have either been truly pioneering – like “Life Insurance Savings”,aproductthatincentivisedsaverstomakelong-termdeposits by offering free life insurance for the whole period of the deposit-orhavebeenfastertomarketandsocapturedalargershareofopportunitiesthrownupbymarketchanges.Asanexampleof the latter, in response to the Central Bank doubling the reserve requirementsforshort-termdepositsinJune2007,competitionfor deposits intensified further and Techcombank launched, within 8workingdays,its“DepositatTechcombank,WinaMercedes”product, which boosted depositor numbers significantly. In fact, within 1 month, this product alone had increased total depositor numbers by about 5% and within 6 months, by nearly 20%, helping contribute to the 156% growth in deposits in 2007 (compared to the aggregate market growth of 50%)3

2“BankingIndustryAnalysisReport”,BaoVietSecuritiesJoint-StockComapny,datedJuly20083 ibid

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Take up of “win Mercedes” savings product: cumulative growth in customer contracts by month following launch

Source:Companyannualreports,Reuters,TheBankerDatabase,brokernotes

Source: Techcombank annual reports

Source: Techcombank data

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20Temenos Case Study

Product Characteristics Speed of launch

Lovely Summer A different gift given to savers based on the size of the deposit

9 working days from conception to launch

Life Insurance Savings Collaboration between Bao Viet Life Insurance and Techcombank, through which a Techcombank customer receives Life Insurance for as long they maintain a deposit at the bank

6 months

Loans for consumption Loans for retail customers where interest iscalculateddailywithnofixedpaymentschedule

3workingdays

Lucky Savings Depositorreceivesaluckyslipthatentersthem into a draw for prizes

1 month

Regular saving Term saving account where customers can receive interest payments at registered frequency

1 month

Some recent products

“Techcombank tailors its retail customer pricing to take account of individual customer profitability”

1st bank in Vietnamto launch real-time online banking and tosupply payment services through SMS

4“BusinessasUsual?TheFutureofITInvestmentinRetailBanking”,Datamonitor,March20098

“Havingacustomer-centric,ratherthanproduct-centric,bankingsystem allows us to tailor our service for individual customers”Nguyen Duc Vinh, CEO, TechcombankCustomer service

Aswithitsproducts,TechcombankhastakenadvantageoftheflexibilityandcustomercentricityofT24tolaunchcuttingedgeimprovementsincustomerservice.Forinstance,TechcombankwasthefirstbankinVietnamtolaunchanauthenticreal-timeonlinebankingserviceforindividuals,F@sti-Bank,whileitwasalsothefirstbankinVietnamtosupplypaymentservicesthroughSMS.Infact,the range of mobile phone services offered by Techcombank – balance statement, money transfer, bill payment, account notifications (whensalarypaid,forexample)andpaymentconfirmations–issuperiortothatofferedbymostWesternbanks.

Techcombank has also capitalised on the complete customer view afforded by T24 to give better and more tailored customer service. For instance, it tailors its retail customer pricing to take account of individual customer profitability. So, if the net interest margin for a particular retail customer is more than 7% (across his or her entire portfolio of products), then the account manager is empowered to give discounts to this customer on future products (within certain parameters). This, therefore, serves as a very effective means of retainingandrewardingthebank’sbestcustomers,aswellasfosteringcross-selling,whichalongwithcustomerreferrals(forwhichwe have no statistics) are the highest sources of marginal profitability. In fact, while we know this is not the case at Techcombank, Datamonitorestimatesthatformostbanks,itisonlycross-sellingandcustomerreferralsthatgeneratemarginalprofitability,sincethecost of capture is so high if a customer is not referred and the cost to serve any customer is so high if not spread over many products4.

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On a more basic level, having a single view of the customer should result in better (and more efficient) handling of all customer queries andgreatercross-sellingpotential–sincethebankemployeeisawareofallproductsthecustomerholdsandthecustomer’sfullhistoryofcorrespondence,etc-andTechcombankhasinvestedheavilyinstafftrainingtoensurethatthisisthecase.So,forexample,there is an increasingly blurred line between teller and account manager: branches are set out in such a way that allows for more comfortable interaction with the bank’s employees who are knowledgeable about the products available and so can perform both sales andservice.Similarly,whenacustomercallsthebank’s24-hourcallcentre,thestaffhavebeentrainedtobeabletodealwithmostqueries,includingthecompletionofcomplicateddocumentation,likecertificatesoforiginforexport.

The innovative, personalised and efficient customer service offered by Techcombank has clearly translated into high customer satisfaction levels. In addition to the awards that Techcombank has won for its customer service – such as “the Most Satisfied Services in 2008” voted by readers of Sai Gon Tiep Thi Magazine – independent market surveys confirm that Techcombank scores consistently higher than its main rivals, Joint Stock Banks like Asia Commercial Bank (ACB) and East Asia Commercial Bank (EAB).

“Independent market research confirms that Techcombank consistently scores higher than its rivals in customer service”

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More personalised and efficient customer service has also resulted in growth in profitability per customer. In 2007 and 2008, Techcombank increased absolute customer numbers by 94%and83%,respectively,butincreasedpre-taxprofitabilityfaster-by148%and125%in2007and2008,respectively.Thismeans that profitability per customer has grown on average more than 25% in the last two years.

25% average growth in revenue/customer in the last two years

Data from customer satisfaction surveys held between Q3 08 and Q1 2009

Source: Cimigo, independent market researchers

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Operational efficiency

Perpetual improvement in efficiency and productivity

Techcombank runs a continuous improvement programme aimed at raising the level of process automation within the bank’s operations centre by building interfaces between T24 and ancillary applications to allow immediate and automatic data transfer or by removingmanualinterventioninprocessworkflows.In2008,theOperationsCenterundertook75initiativestoimproveefficiencyandproductivity,whichresultedina3%reductioninstaffinglevels.Inthefirsthalfof2009,theOperationsCentercompleted21initiativesleading to a 60% reduction in error rates compared with 2008.

Even though Techcombank has made very significant improvements in profitability by customer, the improvement in profitability by employeeisevenmoreimpressive.In2007,profitabilityperemployeeincreasedby34%(comparedtoa28%increaseinprofitabilitypercustomer),whilein2008,profitabilitybyemployeegrewby64%,comparedtoa23%increaseinprofitabilitypercustomer.

64% the increase in profitability per employee in 2008

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2008 Cost/income ratio: Techcombank vs Selected International Retail Banks

2008 cost/income: Techcombank compared to Vietnamese peers

Economies of scale

Overrecentyears,Techcombankhasbeenabletoextractsignificant IT synergies by leveraging its modern, integrated core bankinginfrastructure.Despitethesignificantandsustainedinvestment that Techcombank has made in its IT systems (see earlier section) and despite its clear technology leadership in the Vietnamese market, the fact is that investment in IT, as a percentage of both revenues and costs, has been falling.

Asalreadyexplained,TechombankhasbuiltuptheexpertiseonT24 to be able to launch new products in a day, configure the IT systems for a new branch in an hour and upgrade themselves to thelatestreleaseofthesoftware(withoutexternalhelp)intwomonths.Inthiscontext,ithasnotbeennecessarytoincreaseITheadcountasthesamerateas,forexample,customer-facingbranch staff and, accordingly, the ratio of IT staff/all staff has fallenfrom5%in2006to3%in2008.

Similarly, various other measures of IT efficiency have also improvedconsiderablyoverthelastfewyears.Forexample,ITcostto income – which is a fairer measure of efficiency than IT staff/all staff in that it also captures spend on local contractors who maintainhardwareatbranchesmorethan100kmfromHanoi-has fallen to 1.5%. This is 84% lower than the European industry average of 9.5%5.

84% lowerTechom’s IT cost/income compared to industry average

5 See Boston Consulting Group’s Third Annual IT Cost Benchmarking Study from May 2006

Source:Companyannualreports,Reuters,TheBankerDatabase,brokernotes Source:Companyannualreports,Reuters,TheBankerDatabase,brokernotes

“At Techcombank, we are committed to a culture of perpetual improvement in efficiency and productivity” Trung Van Nguyen, Director of Operations Centre, Techcombank

“Having a centralised and modern IT infrastructure allows us to gain significant economies of scale as we grow” Le Xuan Vu, CIO, Techcombank

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IT Cost as % of Income

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IT efficiency: Techcombank compared to European industry average for several metrics

Improved management information

As part of its ongoing investment programme, Techcombank has carried out several projects to enhance the quality and timeliness of management reporting by making better use of T24’s integrated data set and structure. These projects have rangedfromminor,incrementalenhancements-likeusingtheT24end-usertoolstodefinenewvalue-addingreports-totheimplementation in 2007 of the T24 management reporting module.

With the introduction of this management reporting module, Techcombank is able to get much more granular information – in particularregardingprofitability-toinformdecision-making.Forexample,Techcombanknowtracksprofitabilitybycustomer,by product, by line of business (treasury, corporate, retail) and by branch and, as already discussed, the bank is actively making use of this information to determine its customer pricing. It also usestheinformation,interalia,toinfluenceitsriskstrategy(seelater), its product promotions and investments, any variations in regional pricing and its divisional investment decisions. In order for this information to be valuable, it has to be precise, so in generating these marginal profitability figures, Techcombank uses more than 20 drivers for each. In the case of profitability by product, for instance, Techcombank allocates costsonthebasisofnumberoftransactions,channelmixoftransactions (and costs of the same) and processing time.

Techcombank is currently undertaking a project to be able to generate profitability by Relationship Manager.

“AtTechcom,wehaveaconservativeapproachtorisk,which,toacertainextent,T24hashelped us to embed across the company. But, where T24 really adds value is by giving us a global view of risk, both at the customer level and the total bank level.”

Ly Huong Thi Le, Manager, Credit Risk Department, Techcombank

Risk managementAsalreadymentioned,TechcombankhasgrownrevenuesandprofitsfasterthananyotherbankinVietnam,butnotattheexpenseofrisk management.

Comparing Techcombank to peers, it is clear that its loan book grew faster than the market average over recent years, at a compound annual rate of 65% vs. we estimate 52.5% for the overall market. However, because of its success in growing deposits, its ratio of loans todeposits,akeymeasureofrisk,hasactuallybeenfallingforthelast3years.

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2008 ratio of loans to deposits: Techcombank vs selected domestic and international peers

Loan growth: Techcombank vs selected domestic peers, 5 year CAGR to 2008

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Source:companyannualreports,Reuters,TheBankerDatabase,brokernotes Source: company accounts, Reuters, broker notes

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Furthermore,thepercentageofnon-performingloansin2008wasmarginallydownon2006levels,reflectingTechcombank’sconservative lending practices, anchored in detailed assessments of credit scoring, customer payment history and the quality of collateral.

Where T24 has helped Techcombank, in addition to helping to speed up and automate many of its risk assessment processes, is by givingacompleteviewofrisk.Thisistruebothatthemacro,banklevel–whereproducingreportsoftotalloanexposure,forexample,takeslessthanhour–aswellasatthemicrocustomerandcounterpartylevel–wheretotalindividualclientexposurecanbeseeninreal-time,whileassessingrisktoanyonecounterpartytakeslessthan15minutes.

There abound cases of where Techcombank has capitalised on this global view of risk. For instance, Techcombank has been able to use itscompleteviewofloansanddepositarrangementstoestablishabettermatchofthetimedurationofthesame.Asanexample,itrecently began to offer better time deposit rates to customers in Southern Vietnam to incentivise them to make bigger and longer duration deposits in order to match the typically longer duration loans taken in Southern Vietnam compared to provinces in the North.

SummaryTechcombank has always been an ambitious bank with a clear understanding of the value that technology can bring in differentiating and growing its business.

In 2001, after a detailed selection process involving local and international vendors, Techcombank selected T24 as its core banking platform.

SinceT24’sinstallationatthebank,Techcombankhasmadesignificantincrementalinvestmentsinthesystem,extendingtheusageoftheproductacrossmorepartsofthebank,whiletakingnewreleasestoensureitsfunctionalityandtechnologyremainup-to-date.

TheselectionandsubsequentsustainedinvestmentinT24hasfacilitatedTechcombank’sextraordinarygrowthofrecentyears.

The ability to launch more innovative products than peers and more quickly has enabled Techcombank to grow its deposits faster than any other bank in Vietnam, at a CAGR of 72% over the last five years.

The ability to tailor services to individual customer requirements has translated into the highest customer satisfaction of any Joint StockBankaswellasstrongcross-sellingandrepeatbusiness:revenuepercustomerhasincreasedbymorethan25%onaverageover the last two years.

HavingamodernandscalablesystemhasallowedTechcombanktoextractsignificantoperationalefficienciesasithasgrown: IT cost/income stands at 1.5%, 84% below the industry average.

Lastly, having a robust system with a complete view of risk has allowed Techcombank to grow revenues without sacrificing risk management.Thepercentageofnon-performingloansin2008was3%lowerthanin2006despitea199%growthinloansoverthesame period.

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2008 Return on Equity: Techcombank vs selected domestic and international peers

Source:companyannualreports,Reuters,TheBankerDatabase,brokernotes

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Appendix Glossary of abbreviations

ACB Asia Commercial Bank

BCP Banco Commercial Portugues

BP Banco Populare

CAGR Compound Annual Growth Rate

EAB Eastern Asia Commercial Bank

EXIM VietnamEximbank(Export–ImportJSCommercialBank)

HB Habubank (Hanoi Building JS Commercial Bank)

MHB Housing Bank of Mekong

NIM Net Interest Margin

Post DeutschePostbank

SBIT Saigon Bank for Industry and Trade

SCB Sacombank (Saigon Thuong Tin Commercial Bank)

STB Saigon Hanoi Commercial Bank

TCB Techcombank

VB Joint Stock Bank for Foreign Trade of Vietnam

VBARD VietnamBankforAgricultureandRuralDevelopment

VIDB VietnamInvestmentandDevelopmentBank

Vietin Vietnam International Bank

AuthorsBen RobinsonisDirectorofStrategicPlanningatTemenos,basedintheGenevaHeadquarters.Hecanbecontactedbyemailatbrobinson@temenos.com

Nathan Pillai is a senior financial analyst, based in Temenos’ offices in Chennai.

Further contactFor more information about Temenos’ products or to arrange a product demonstration, please contact salesteam@temenos.com

Forinformationregardingre-useofthispublicationortoobtainotherrecentstudies,pleasecontactmarketing@temenos.com

For general enquiries, please visit our website: www.temenos.com

About TemenosFoundedin1993andlistedontheSwissStockExchange(SIX:TEMN),TemenosGroupAGisaglobalproviderofbankingsoftwaresystems in the Retail, Corporate & Correspondent, Universal, Private, Islamic and Microfinance & Community banking markets. Headquartered in Geneva with 51 offices worldwide, Temenos serves over 700 customers in more than 120 countries. Temenos’ software products provide advanced technology and rich functionality, incorporating best practice processes that leverage Temenos’ experienceinover600implementationsaroundtheglobe.Temenos’advancedandautomatedimplementationapproach,providedbyitsstrongClientServicesorganisation,ensuresefficientandlow-riskcorebankingplatformmigrations.Temenosannuallyinvestsaround20%inR&D,significantlymorethanitspeers,intoasinglefullypackagedupgradeablesoftwarerelease,whichensuresallTemenos customers benefit from modern technology and support indefinitely. Temenos is top of the IBS Sales League Table 2008, winner of the Best Core Banking Product category in Banking Technology magazine’s Readers’ Choice Awards 2008 and is listed in the American Banker top 100 FinTech companies.

DisclaimerThis case study is based on selected information available in the public domain and provided by the bank, upon which we have placed reasonable reliance. In arriving at our conclusions regarding the Vietnamese market specifically, we have analysed more than 20 of thelargestbanksinVietnam,includingallState-ownedcommercialbanks.

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