In the first quarter of 2024, Vietnam’s economy expanded 5.7% year on year. While that was faster than the 3.4% growth reported the previous quarter, it was still a lower-than-expected result for the Southeast Asian country: Its government is targeting 6.0% to 6.5% growth for the year.
Economists blame an anti-corruption drive from Hanoi and a weak global economy for the slowdown. But while last year was a “perfect storm” of headwinds for Vietnam, Jens Lottner, CEO of Vietnam Technological and Commercial Joint-Stock Bank, or Techcombank for short, is bullish on the Southeast Asian economy’s future.
“Sixty to seventy percent of Vietnamese people are very optimistic. They think the future will be better than today. It’s a huge number,” Lottner says. He reasons that the Vietnamese have “all the right to think it’ll be better”: If Vietnam was to continue on its trajectory, in about 10 years its GDP per capita will roughly be where China’s is today.
Techcombank is one of Vietnam’s largest banks. With annual revenue of $3.2 billion, it’s No. 114 on Fortune’s inaugural Southeast Asia 500 list, which measures the region’s largest companies by revenue.
Lottner says Techcombank wants to target Vietnam’s young, who are more confident in their ability to make money because of the country’s growth. “We want to bank aspiring people,” he says.
What is Techcombank?
Techcombank started in 1993 with just 20 billion Vietnamese dong ($790 million at today’s exchange rates) in charter capital. The bank attracted prominent domestic and international investors. Masan Group (No. 110 on the Southeast Asia 500) has a major stake in Techcombank, as did HSBC (which sold its stake in 2017) and U.S.-based private equity firm Warburg Pincus, which pumped $270 million into the bank in 2018.
Lottner joined Techcombank as CEO in 2020, after serving as chief financial officer of Thailand-based Siam Commercial Bank. He’s been in Asia since 2001, when he moved to Malaysia as a McKinsey consultant.
“We work a lot with companies who want to cater to Vietnam’s emerging middle-income class,” Lottner says. The bank invests more in sectors like travel, fast-moving consumer goods, and entertainment, which cater to aspirational Vietnamese consumers.
Younger customers are also flocking to Techcombank’s digital offerings—which in turn gives the Vietnamese bank more data to help tailor its products and provide a better customer experience.
So far, Techcombank’s focus on consumers is working. Lottner notes that despite his bank being smaller than its Vietnamese peers when measured by assets, it has a disproportionately larger market share in consumer-facing services like credit cards, even reaching as high as 60% for some wealth products.
“Our fee income is higher than any other bank in the market, in absolute terms and not just a percentage,” Lottner claims.
Vietnam’s economy
Global trade slowed in 2023, as elevated energy prices and persistent inflation weighed on Vietnam’s export-driven and manufacturing-led economy.
Politics also played a role in the slowdown. “Growth was held back by the policy paralysis triggered by the Communist Party’s aggressive anti-corruption drive and export weakness,” notes Priyanka Kishore, founder of economic consultancy Asia Decoded. “The significant hit to business confidence spilled over to consumption and investment.”
An anti-corruption campaign, launched in 2016, intensified into a major leadership shake-up last year, even taking down the country’s president, Vo Van Thuong. The country had 839 new corruption cases last year with over 2,270 individuals charged, an almost twofold increase compared with the year before, according to a Vietnamese government report.
Earlier this year, a Vietnamese court sentenced Truong My Lan, a property developer, to death for siphoning off $44 billion from Saigon Commercial Bank between 2012 and 2022. Law enforcement alleged that Lan owned more than 90% of the bank through hundreds of shell companies, despite regulations preventing any individual from owning more than a 5% stake.
Techcombank was inadvertently affected, too. The corruption crackdown spread to Vietnam’s graft-plagued real estate sector, with the government accusing some developers of property bond fraud.
Lottner called 2023 a “perfect storm” spurred by “bad players in the market.” Several parts of the bank’s business “took a hit,” he explains. “We are very much the leading player when it comes to current accounts, so when suddenly interest rates were rising like crazy, all the money went into another area,” he says. Bancassurance, a market where Techcombank is the largest player, also “collapsed,” he continues.
Only the bank’s focus on its retail customer segment and its risk management strategy allowed it to navigate the choppiness of 2023, Lottner explained.
Still, Techcombank’s CEO expects the Vietnamese economy to keep expanding at a fast clip. Property makes up less than 5% of Vietnam’s economy; by comparison, China’s real estate sector contributed as much as a third of GDP, according to some estimates. Lottner thinks Vietnam’s real estate problems are temporary, as middle-income Vietnamese will continue to aspire to own property.
Banks rising with Vietnam
Vietnam has a growing middle-class population. About 13% of Vietnam’s population is middle-income, using the World Bank’s definition. That share is projected to double by 2026, according to the Vietnam government’s projections.
That’s good news for Vietnam’s banks. “The health of the banking sector is closely tied to the economic outlook,” Kishore explains. “This is because the channels through which banks make money—retail lending, private wealth management, M&A activity, to name a few—typically do better when the economy is doing well, and consumer and business sentiment is positive.”
Of the 70 Vietnamese companies on the list, 18 are banks, with many sitting near the top of the rankings.
Even if banks have been shaken by recent scandals and crackdowns, Lottner thinks that new regulations will help well-established institutions like Techcombank that do things by the book.
Vietnamese authorities have introduced new regulations, including lowering the maximum stake institutional investors can hold in domestic banks. Supporters think these will prevent a repeat of the Truong My Lan case. The limit on individual investors will remain at 5%.
“These are all good and bright movements,” Lottner says. Regulations “will ultimately favor the stronger banks and make sure the bar is higher for everyone.”
