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Profitability Ratios1. (1)

Return on Assets (ROA) for Vietcombank (VCB) improved from 1.39% in 2020 to 1.80% in 2023, indicating effective management in converting assets into profits despite a slight decline in 2023. The bank's net income nearly doubled over four years, showcasing enhanced profitability, while total assets grew significantly, reflecting efficient scaling. Although VCB's ROA did not lead among competitors, it demonstrated consistent growth and solid asset management compared to other major Vietnamese banks.

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4 views

Profitability Ratios1. (1)

Return on Assets (ROA) for Vietcombank (VCB) improved from 1.39% in 2020 to 1.80% in 2023, indicating effective management in converting assets into profits despite a slight decline in 2023. The bank's net income nearly doubled over four years, showcasing enhanced profitability, while total assets grew significantly, reflecting efficient scaling. Although VCB's ROA did not lead among competitors, it demonstrated consistent growth and solid asset management compared to other major Vietnamese banks.

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baonguyen.31231025678
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Return on assets (ROA) is primarily an indicator of managerial efficiency.

It indicates how
capable management has been in converting assets into net earnings. It can be calculated by
the following formulas

ROA = Net income/ Total assets

ROA Net income Total assets


2020 1,39% 18.472.518 1.326.230.092
2021 1,51% 21.393.045 1.414.672.587
2022 1,65% 29.919.054 1.813.815.170
2023 1,80% 33.054.448 1.839.613.198

Net Income Increase: Net income almost doubled over four years, from ~18.47 million to
~33.05 million.This growth underlines improved profitability and operational performance.
Total assets: Total assets grew significantly (~39% increase from 2020 to 2023). Despite the
growing asset base, the bank managed to grow net income at a faster pace, indicating
efficient scaling.

With the given information about Net income and total assets in the balance sheet, we
have a steady ROA growth: ROA improved consistently from 1.39% in 2020 to 1.80% in
2023. This suggests the bank is increasingly effective at converting its asset base into profits.

Net noninterest margin= ( Noninterest revenues - provision for loan and lease losses -
Noninterest expenses)/ Total assets

Net operating margin= Pretax net operating income/ Total assets

EPS= Net income/ Common equity shares outstanding

Net non interest margin Net operating margin EPS


2020 0,0050 0,0249 2210,689086
2021 0,0052 0,0277 2560,201652
2022 0,0038 0,0258 3580,547391
2023 0,0031 0,0249 3955,774055

The net operating margin, net interest margin, and net noninterest margin are efficiency
measures as well as profitability measures

The net interest margin measures how large a spread between interest revenues and interest
costs management has been able to achieve. It peaked in 2021 (0.52%), then declined sharply
to 0.31% by 2023. The bank is generating less income from non-interest sources over time,
potentially due to: Lower fee-based revenue, higher competition in non-interest services, shift
in business model toward interest income

The net noninterest margin measures the amount of noninterest revenues stemming from
service fees the bank has been able to collect relative to the amount of noninterest costs
incurred. It rose to 2.77% in 2021, then gradually declined back to 2.49% in 2023 (same level
as 2020). Indicates pressure on core operations, possibly due to rising operational costs or
slower revenue growth. Stability in 2023 (2.49%) suggests cost control is helping balance
lower operating efficiency

EPS: Profit allocated to each share of common stock a critical indicator of shareholder value.
It is consistent and strong growth from 2,210.69 in 2020 to 3,955.77 in 2023 (~79% total
growth). Even with declining margins, net income is growing, likely due to: Increased
volume of business, strong interest income, improved cost efficiency in other areas

Earnings Total interest income/ Total interest expense/ total


spread total earning assets interest bearing liabilities
2020 0,1083 0,0692 -0,0391
2021 0,0865 0,0530 -0,0334
2022 0,0880 0,0540 -0,0340
2023 0,1135 0,0626 -0,0509

Another traditional measure of earnings efficiency is the earnings spread

Measures the effectiveness of a financial firm’s intermediation function in borrowing and


lending money and also the intensity of competition in the firm’s market area. Greater
competition tends to squeeze the difference between average asset yields and average liability
costs. If other factors are held constant, the spread will decline as competition increases.
Between 2020 and 2021, the earnings spread dropped from 10.83% to 8.65%, likely
reflecting increased market competition or a decline in asset yields. However, by 2023, the
spread rose sharply to 11.35%, indicating that the bank successfully managed interest income
relative to rising funding costs—possibly through strategic loan repricing or improved asset
composition. This upward trend reflects enhanced profitability and operational resilience in a
rising interest rate environment

ROA = Net profit margin x Asset turnover

ROA= Net profit/Sales ratio x Asset turnover


2020 1,45% 0,3765 0,0385
2021 1,56% 0,3771 0,0414
2022 1,85% 0,4395 0,0422
2023 1,81% 0,4881 0,0371
Return on Assets (ROA) measures a bank’s ability to generate net income from its total
assets, combining profitability and operational efficiency. From 2020 to 2023, Vietcombank
(VCB) showed a consistent upward trend in ROA, rising from 1.45% in 2020 to 1.85% in
2022, before a slight decrease to 1.81% in 2023. This indicates a strong overall performance
in utilizing assets to deliver shareholder value.

The net profit margin (net profit/sales), a key driver of ROA, increased steadily from
37.65% in 2020 to 48.81% in 2023, reflecting VCB’s improving operational efficiency and
cost control. The bank was able to extract more profit from each unit of revenue year after
year, highlighting a clear trajectory of increasing profitability.

Meanwhile, asset turnover (sales/average assets), which measures how efficiently the bank
uses its assets to generate revenue, showed a modest increase from 0.0385 in 2020 to 0.0422
in 2022, before a slight drop to 0.0371 in 2023. While the 2023 decline suggests a small dip
in asset utilization, the overall efficiency remained stable.

2020 2021 2022 2023


Gross interest
income/Total assets 0,0522 0,0500 0,0486 0,0588
-Interest expense/Total
assets 0,0248 0,0200 0,0192 0,0296
Net interest
margin/Total assets 0,0274 0,0300 0,0294 0,0291
Noninterest income/total
assets 0,0132 0,0134 0,0118 0,0123
-Noninterest
expenses/Total assets 0,0157 0,0157 0,0153 0,0166
-Provision for loan
losses/Total assets 0,0075 0,0083 0,0052 0,0025
Pretax net operating
income/total assets 0,0174 0,0193 0,0206 0,0224
-Income taxes/total
assets 0,0035 0,0039 0,0041 0,0045
Income before
extraordinary
items/Total assets 0,0139 0,0155 0,0165 0,0179
Extraordinary net
gains/Total assets 0 0 0 0
Net income/Total assets 0,0139 0,0151 0,0165 0,0180
Calculating Return on Assets (ROA)

Benchmark
Return on Assets (ROA) is a key indicator of a bank’s efficiency in generating profits from
its assets. We compare the ROA of Vietcombank (VCB) with six other major Vietnamese
banks—Shinhan, Techcombank, ACB, MBB, VPB, and BIDV—from 2020 to 2023 to assess
VCB's asset efficiency and profitability.

While VCB did not lead in ROA as it did in ROE, it demonstrated steady improvement over
the four-year period, increasing from 1.45% in 2020 to 1.81% in 2023. This upward trend
highlights VCB’s growing efficiency in utilizing its asset base. However, VCB was
consistently outperformed by ACB, which achieved the highest ROA each year, peaking at
8.75% in 2023. Shinhan and MBB also surpassed VCB in 2023, with Shinhan reaching
2.65%.

Despite not topping the ROA chart, VCB maintained a consistent and stable growth
trajectory, reflecting solid asset management and operational control. In contrast, VPB and
BIDV displayed lower and more fluctuating ROA figures, with VPB declining to 1.04% in
2023, and BIDV remaining under 1% throughout the entire period.

Overall, while VCB's ROA may not match its dominance in ROE, its year-over-year
improvement and reliable performance still underscore a strong operational foundation and
disciplined asset strategy.

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