Vietnam Technological and Commercial Joint Stock Bank (TCB) Earnings Call Transcript & Summary

[Operator Instructions] With that, I would like to welcome our new CEO, Mr. Jens Lottner for his debut session with investors. Jens has managed to safely come join Techcombank in the middle of a global pandemic after successfully emerging from a mandatory 2-week quarantine in August. We hope that he will have a chance to meet many of you in person soon when we are able to have live meetings with international investors again. I will now turn it over to Jens for opening remarks, and then Mr. Bang Trinh, our group CFO, who will walk you through the financial results.

Thanks for the kind words and thanks and everyone who is joining and taking the time. So today, we thought we basically walk through the results, giving a little bit of an outlook in terms of what we think will be happening until the end of the year and probably also next year. But again, focus as usual is actually the third quarter results. Without going into too much detail at this point in time because our CFO will actually go through the numbers in much more detail. I think it's sufficient to say that this was a very strong quarter for us in terms of all the metrics. So TOI has actually grown very significantly year-on-year, but also non-NII has actually performed pretty well. And PBT year-on-year is up around 37%. NPL has come down because we have been very kind of prudent in terms of managing down on some of the NPLs, which were looming. And return on assets still very strong and car as probably everyone knows, is amongst the strongest in the industry and has continued to be pretty strong. So that all aside, as I said, people will have a chance to go much deeper into that as Bang will walk us through the numbers. And let me just spend a little bit of time to talk about what is probably in store for the end of the year and what's supposed to come. So I think we all see right now that the second wave is sitting in full force in Europe. And Asia, again, is probably in a much better shape. However, if you work through the overall scenarios, probably we will see a rebound in 2021. And again, how strong that will be, as you see the optimistic scenario is probably out, and we are somewhere between the base case and the -- on kind of more pessimistic scenario, but our planning assumptions are still actually that we are in a base case scenario, which would mean that the global economy is probably going back to around 5%. If you take this down to Vietnam, we will, probably this year, be much, much better off than a lot of other countries in the world, we would still see positive GDP growth. And we will probably be around 2% to 3%. And probably last quarter, we'll be actually already seeing a rebound. So overall, we still see that. We probably have seen on the peak and also in terms of some of the NPL numbers. What we expect next year is around, again, more than 6%. Is it 6% to 8%? Nobody knows exactly. But again, we think we go back to a relatively strong trajectory. Most of that is because domestic demand stays pretty much intact. And the exports will probably come back as the overall global economy is rebounding. And then some of the core indicators, inflation, et cetera, will probably all remain pretty much balanced and under control. So therefore, if you see the forecast, 6.5% in terms of GDP growth, inflation rate, fine. Unemployment probably still stays somewhat elevated. That's probably the only number which is a little bit more worrying of 3.2%. Again, given the fact that we are not so exposed in consumer finance and some of these areas. And again, it's not good overall, but it's probably less affecting some of the things we are doing. And FDI will probably get to record levels, again next year, as we see some of the shifts coming in from the restructuring of the global supply chains. And exports are still holding up. The other one, which I think -- and we'll talk a little bit about it, is the -- we will see quite some liquidity still in the market. And I think there has been a lot of liquidity pumped in order to make sure that the economy is actually a flush with cash and liquidity, in order to make sure that interest rates stay relatively low, and companies have an ample credit in order to master the challenges we are currently facing. But we believe that will actually still be in the system for quite some time, and that will affect the way how we're looking at interest rates. And that's a little bit on to the details of that. I think if you look on the right-hand side and you see what are the required reserves and then what are the excess reserves which are with the Central Bank and State Bank of Vietnam, you see that there's still an ample excess reserves unforecasted, which means we will probably see, despite a very strong demand for credit and probably in the area of around 14% next year, we will still see that we actually have a relatively ample liquidity, which means that maybe some of the margins will be under pressure. So as you see the -- and that's just a little bit of take on the deposit rates, money market rates. You see that it already start coming down from January. And we probably see that this will continue to go down. Again, we will look a little bit deeper into it afterwards. It is clearly somewhat of a windfall profit for the time being. But I think also for banks, which are actually relatively strong on the CASA side and like ourselves, this is actually an opportunity still to maintain the NIM as we start shifting away from term deposits into CASA. And that actually gives us a real opportunity to actually strengthen our franchise compared to some of our competitors. So that's a little bit on the earnings side. I think there are a couple of regulatory changes coming in from the Central Bank. And again, some of that is probably much more secular in terms of cashless and digital. But of course, some of that is also clearly propelled over the last couple of months in the wake of the crisis. Because just as people started using much more remote services across all industry. And digital banking, of course, also started to really go up, and you see that in some of our numbers. But what it means is, there is more and efforts to really actually get these things into a broader set of the banking services, which also means that investment requirements will be pretty high. We see financial inclusion and that clearly is a target over the next couple of years. So that means retail and SME banking will probably gain an importance. And cost of capital, again, we are relatively well capitalized compared to our competitors. We believe actually that they will rather come to us than we will come to them, meaning I think the overall requirements in terms of capital will be going up. And last but not least, I think we'll see more and more scrutiny rightfully on delivering the right experience to customers and make sure we are actually protecting the interest of customers. What it means ultimately is, cost of business will actually going up because on the one hand, we have to invest in kind of technology and the right infrastructure but then also regulatory costs, and we're probably also going up as we go closer and closer to the international standards. So overall, we believe actually that the overall economic environment will start shifting, we will have hopefully seen the bottom. And from there, it actually should be going up. We should be better than a lot of other countries around the globe and also in Asia. But again, because of that, we will probably have some more competition which will effect on pricing at the same point in time. As we see on cost of business probably going up, it just means that it will be on us to make sure that we're actually managing the book very tightly and also that we are continuously improving the productivity of our business and reshaping our business models, fully leveraging on some of the investments we have made, but we're also intending to make. So I think that's probably, at this point in time, we're going a little bit deeper in the Q&A session on some of these questions. But that's probably more the general feeling on what we see and what we're expecting for 2021. So probably at this point in time, and let's dive a little bit deeper into the results for the third quarter. Thanks.

Thank you very much, Jens. And I think Jens provided some great context around where we are in this environment. I will just say, we went certainly from, I think, the view and what we saw from the governing Vietnam early this year was by putting us in a great starting position, it has allowed us to weather as an economy and certainly as a sector, much better than the peers around the region around the globe. With that as well for us, what we've been working on is controlling those levers of costs, if you will, putting ourselves in a position, coming into the recovery in a very strong position. So with that, when we look at our 9 months and our quarterly results, very, very strong operating metrics across all metrics. As Jens highlighted, our top line DOI growth was 33.5% over the 9 months. Net interest income has also been up. So both, drivers of noninterest income as well as net interest income, are also up significantly, close to 28% to almost 30% on NII. And then on non-NII, up 46%. I'll go into a little bit more detail of that later. I think where we've been very strong is managing costs. We've lowered our cost of funding. With the increase in CASA, we've managed our cost-to-income ratio very tightly at 33%. It gives us a lot of room to invest selectively as we move forward. So when you look at our pre-provisioning operating profit as well as just our profit before tax, and strong growth year-over-year. Likewise, we've managed our risk cost quite a bit. We have written off more loans this year. This has been, again, more using the opportunity to review our portfolio, increase our coverage ratio and still put ourselves in a position, heading into 2021. If you look at our return metrics, very strong, both in ROA, ROE. And importantly, the quality of our earnings continue to be robust when you look at our return on risk-weighted assets. I think, as Jens mentioned, really, the key for us having a very solid balance sheet is having strong capital and liquidity, best-in-sector capital ratios of 16.7%. And again -- and then on the liquidity side, both in terms of short-term to medium, long-term lending ratio is low, and then the cost ratio obviously gives us -- is a reflection of the strength of our deposit franchise as well as our cost of funding. One of the things I want to highlight again in this environment, despite a more cautious approach to credit growth at the beginning of the year, we've still enjoyed a very strong earnings momentum. So looking at where we are at 9 months, up 34% year-over-year. We've also managed to continue to deliver profit after-tax growth and maintain a healthy level of margins, despite increasing provisioning against the context of this uncertain environment. I mentioned ROA and in return an RORWA again, but it's worth just noting that we've been able to, despite the market headwinds to maintain this. And it's a function of, again, focusing on what we've said in the past, how do we manage different levers of growth to deliver low risk, high return and high-quality earnings. And as we look at the credit growth and where it came from, it really, this year, has been one of focusing on supporting customers while still maintaining a healthy underwriting and risk discipline. So in terms of where the growth has been, most of it has -- as you can see, a lot of it has gone into our large corporate customers who have actually been fairly resilient through this year, have actually -- and have used the capital to -- in lending to continue to grow their business. As we said in previous quarters, the SME segment had been more challenged. Business activity had been slowed down. So naturally, we -- and much of our book on the SME side is short-term working capital. So no surprise there. We were a little bit more cautious at the front end of the year. We are seeing a pickup in activity now as we head into the back half of the year as we're seeing a rebound in economic growth. On the retail side, again, early part of this year, a number of projects were delayed. Social distancing was also an implication, but we are seeing growth coming back into the back half of this year. But through 9 months, again, a more modest growth on the retail side. The last point on that last chart, again, is 90% -- over 90% of our book is secured. So that, again, just reflects the underwriting discipline that we maintain. Financial results, when we look at it, looking at last year versus this year, certainly a big change in terms of overall, market environment will be managed to still continue to deliver year-over-year strong growth with the core business. So no one-offs. Again, I mentioned earlier, the strong NII growth year-over-year contribution from noninterest income. I'll go into that a little bit. Importantly, we have still managed to enjoy strong recoveries, up 35% year-over-year, even with the backdrop of the headwinds impacting the economy. And then on OpEx, we continue to maintain discipline there. It is up 27%. I will go into that in detail, but we are [indiscernible] investing but have managed pretty tightly. And now kind of opening up a little bit more on that as we head into the final part of the year as we prepare for next year with certain investments. I think the big difference here when you look at year-over-year comparison is the increase in provision expenses that is up pretty significantly, 271%. But as we've said in previous quarters, we've used this opportunity to selectively go through -- prune our NPLs, which puts us in a very healthy asset quality position going forward. So net-net, 21% year-over-year profit before tax growth. So now let's dig it down a little bit deeper into the drivers of our revenue. When you look at the key drivers on net interest income and noninterest income, we've seen very strong growth in noninterest income, almost 1.7x that of the net interest income. Again, a reflection of our strategy of increasing the diversity of our revenue, a lot more NFI, and that's reflected, even though we've had the challenges of COVID. Where that's coming from across all segments. We've seen it on the net interest income. Again, you've seen the growth in wholesale banking on the corporate balance. So net interest income is up there. Even with more modest growth in the retail segment, we've still seen healthy growth and net income come there. Again, a lot of this is driven by a cost of funding advantage. Net fee income, we have seen growth in both, SME and corporate. A lot of the corporate has been driven by the Banca fees. There has been a bit of a decline in the PFS segment. Part of that is the increase in the 1% cash back. So a lot more transactional activity, but that has helped drive up cost of growth. The other piece of that, I'll hit in a moment, is on Banca. We've had a little bit of a decline year-over-year on Banca. Part of that was impacted by the social distancing measures, earlier part of the year. Now when we look at the net interest margin, we have been able to actually expand net interest margin over the last quarter, up 30 bps. When you look at what's driving that. Part of it is very much the decline in deposit rates. As Jens had mentioned, we continue to enjoy a healthy CASA growth when you look at the deposit balance, 49% year-over-year growth in CASA, relative to the 1% growth in term deposits. So that in itself has driven down our cost of funding. At the same time, on the credit balance side, this reflects a bit -- stable lending rates have reflected a shift in loan mix. We do see, going forward, as Jens mentioned, it will be a competitive environment with a lot of liquidity. So we would expect to see some pressure on lending rates. But again, I think we can offset that with the net margin. And when you look at net interest income, again, we're tracking at a higher growth rate than the CAGR over the last few years. And so up 28% year-over-year on net interest income. The huge driver, again, that we've talked about and continue to reinforce is the strength of our deposit franchise and particularly our CASA franchise. This has been a strategic advantage for us. We've seen it again in expansion of NIMs and lower cost of funding. When you look at what's happened over the last few years, we have increased our cost of market share dramatically, relative to the rest of the sector. When you look at it, our overall cost of ratio for the 9 months and recent quarter, we are now #1 in the market. So we certainly recognize the importance of preserving and expanding our CASA franchise. And then when you look at -- by segment as well, a lot of this has been -- while you see growth across both, corporate and retail, it's really retail that has been a key driver, growing 63% year-over-year. We've also seen and certainly appreciate the trust that customers have placed with us in this environment. We've also seen that reflected in the average cost of balances per customer. And then lastly, on the term deposit side as well, we've seen a significant amount of additional activity on -- through our online channel, and we welcome that. As we think about how to, again, engage with more of our customers in giving them the convenience they are looking for through digital channels. Now one of the trends we're seeing and as we think about CASA and where we can go with cost of ratio, a lot of this is possible given the digital engagement our customers are having with us. We are growing exponentially, when you look at transaction volume and transaction value. And when you also look at how we are getting a lot of our deposits and retail transactions, a lot of that now is happening through our digital and e-banking channels. So that is growing dramatically. And you can see that reflected again in the growth of our CASA over the last couple of years. And even importantly, just over year-over-year significant uptick in terms of basis point growth, almost 860 basis point growth in CASA ratio. So I think these -- the growth in our digital channels of the engagement from investors will continue to help drive CASA for the foreseeable future. Likewise, the success we've seen in retail cost that we're working to duplicate on the corporate side as well. So we're seeing, again, exponential growth in the engagement on our corporate side. As you can see, we certainly expect that to translate into more cost of growth for corporate cost of growth going forward. But I think the key is, we are seeing that engagement with our corporate customers. We'll continue to invest in improving their experiences and you can see this -- again, you can see this reflected in some of the growth numbers you have here on Chart 19. Now digging into the noninterest income side, really and specifically the NFI. It's up 54% year-over-year. Contributions for all segments of NFI net fee income. So we've seen the contribution come across the board. And I think it's really important to reinforce the importance for us of having multiple drivers of nonfee income. For example, even though we had some challenges earlier in the year with social distancing, which had an impact on our Banca business, we still had an offset there with very robust fee income coming from our bond issuance business. Up 426% year-over-year in the quarter and 73% on a 9-month basis. Within -- if you look at others here, others include some of the businesses that are related to our bond issuance business, so the agency fees, consulting fees. So again, multiple drivers that have allowed us to grow fee income on a year-over-year basis. Just to highlight a few areas in terms of strength over the last quarter and 9 months. The Capital Markets' business has continued to be robust in this environment. So there are corporate issuers that are using this opportunity to raise capital. We have remained to maintain a very strong market share. You can see both in terms of issuance, a significant growth, 9 months -- 114% year-over-year over 9 months. But also importantly, the distribution, which is a strength of our organization and just shows again that there is addressing the needs of both, the corporate issuers as well as our retail affluent customers. In this environment, we've also seen strength in our cards business with additional issuance of cards. We maintain our #1 market share with Visa, both in terms of debit and credit cards. I think this again, just reflects the growing needs of our affluent, mass affluent customers, they're shifting spending behavior. And again, a lot of this is the move towards more cashless. So we are there to make sure we are able to capture this trend. And the results are reflected in this, with the card business results. On the cost side, this continues to be a strength of ours in terms of managing our costs. And when you look at the 9-month results, we've been able to manage costs well across multiple metrics, whether it's CIR of 33%, having a positive [indiscernible] and even maintaining relatively flat headcount to year-end 2019. The goal here is to continue to manage this very tightly as we did early part of the year but it gives us a lot of headroom on cost/income ratio to invest, and we are investing selectively to continue to build out some of our foundational capabilities. This is to improve customer experiences, improve employee productivity and importantly, operational efficiency. So as we move forward and Jens may touch upon this later in Q&A, is just thinking about where we're investing to make sure we can capture the opportunity ahead of us. I think one of the things that we've heard a lot from investors and certainly want to make sure we spend a little bit of time on this quarter, is talking about asset quality. Importantly, our asset quality continues to be very healthy. When you look across a number of metrics, we have again, I think on write-offs, let me comment on that. This has not been a forced measure. So as we look at the qualitative assessment of our loan book, we have selectively written off some of the nonperforming loans, taking kind of a cautious view given the uncertain environment. Knowing that we also are able to potentially enjoy those recoveries later on. So you have seen our credit costs expand a bit from second quarter into third quarter. But at the same time, again, we do expect some of that to come back in the form of recoveries later. Importantly, what it's done is, has given us more of a buffer on the coverage ratio side and now we're clicking close to 150%. And if you look at our actual NPL balance, that has dropped 63% from a year ago. So that puts us again in a very healthy position in terms of managing our risk costs, going forward. NPL formation has been another topic that we are very focused on. If you look at the formation, it's relatively stable, despite COVID-19. And importantly, when you look at both net new formation, that has been, again, managed reasonably well. There's write-offs, as you can see the cumulative write-offs of that 0.7%, [ VND 1.1 trillion ], and the most recent quarter, VND 1.4 trillion. On the B2 balance, again, this is again, an early indicator of where NPLs could be going. But when you look at the 2 together, you can see that again, B2 bucket is, again, fairly stable and that shift outside of B2 for the third quarter. Most of that actually went back into bucket 1, with a small portion going beyond that. And again, you can see that in the NPL formation in the chart on the left. Now when you look at restructured loans, we have actually been showing an improving trend. So from third quarter to second quarter, the third quarter, our overall restructuring book has actually decreased from 3.6% to 3.1%, is taken place across all business segments from -- with W being flat but [ VBN ] and PFS dropping quite significantly. And then when you look at the actual NPL ratios at third quarter, again, quite healthy and again, puts us in a strong position in going forward at 0.6%. I think one of the things that does allow us now to really think much more strategically is the strong earnings and then importantly, the strength of our balance sheet. So at the 9 months, our capital ratio of 16.7% gives us the highest capital ratios in the sector. When you look at our leverage ratio of 5.7%, that gives us a significant amount of headroom to grow. The real constraint, if at all, would be the lending limits from the SBV. If you look at our absolute equity position as well, it gives us an ability to expand our lending into different areas and again, grow with some of our corporate customers that continue to expand and grow their business in this environment. Likewise, on the right-hand side, the deposit franchise continues to be a strength, particularly with the cost of growth when you look at how much CASA continues to grow. That ratio again gives us the low-cost funding advantage. Irrespective of what happens on the lending side, that is a strength that we will continue to capitalize on. And then liquidity, we enjoy liquidity ratios that are well within the SBV limits. I think maybe tying it all together now. As we think ahead, this year has been a lot about -- and managing from transitioning from BCP and maintaining day-to-day operations while still putting ourselves in a very strong position, relative to our peers and really the opportunity ahead. So when you look at our key operating metrics, I think the key takeaway is that there's a lot of room for us to take advantage of strategic opportunities. So lower cost of funding through CASA and you can see our cost of funding advantage. Our net interest margin remains robust. It is expanding now. We have room for that to compress a bit, but still enjoy the cost of funding advantage. Cost-income ratio, you can see where the average for the comps that we put, plenty of room there to give us headroom to invest selectively where we need to, in technology and people. NPLs, we've been focused on, again, managing very actively through the cycle, our NPLs. And again, having the coverage ratio buffer gives us again room to maneuver. So I think these are key metrics that we've been paying attention to, driving our business. These are things that are within our control. And I think it puts us in a very good position as we look ahead. So just on the fiscal year 2020 outlook, again, we have been extremely fortunate this year in terms of the environment in Vietnam. From where we were actual last year, we're actually looking reasonably strong as we head into the final quarter. The credit growth, I'll start with. It has been much more of a modest and cautious growth for the first part of the year. As we see -- we are seeing in our pipeline, opportunity for uplift as the economy recovers. So we do expect to see a bit more credit growth, as we head into this final quarter. Cost of funding advantage, we still see the pressure on deposits. So we do see an advantage on cost of funding and with the strong cost of growth heading into the final quarter. Again, stability of CASA. I think we've been seeing -- again, we continue to see inbound especially from retail customers. And so again, I think, that will give us a bit of an advantage as we head into next year. On net interest margin, we still see that deposits are repricing a bit faster at this point than the lending rates. So we do see a little bit more of an uptick in net interest margin. I think, as we think about what happens next year, that may stabilize and be a little bit more again, stable and healthy, but we feel good about where we are on that. Noninterest income, we did see a significant amount of growth through the first 9 months, strong -- certainly strong income from our bond business. This may slow in the fourth quarter, but overall, a very healthy year on the noninterest income growth. Cost income ratio, I've mentioned in the last quarter as economic activity rebounds. We would expect to see a bit of an uptick into the final part of the year, so where we make certain investments. And so that's likely to kind of bump up a little bit. And then NPLs and credit costs related to asset quality. We see this as being relatively stable. As Jens talked about at the bottom, I think we have seeing the peak barring another outbreak that we cannot contain. So I think overall, as we look ahead to the final part of the year, it's been a year so far that has been challenging with the headwinds, but I think we have done a good job as a management team to control the key levers that we can and reasonably cautiously optimistic about how we're seeing economic activity pick up now. So with that, that will close the formal part of our presentation. I think we'll take a short break. Sorry, one last chart. One thing I wanted just to highlight, I apologize, is related to our share price. We've been talking about this the last couple of quarters and certainly have seen a bit of an uptick most recently, both in terms of liquidity, which is now significantly up over the last month. 28 million shares versus 2 million to 3 million shares previously. So there has been a lot more activity in our stock. We've seen a bit of an uptick in our stock price. This is a reflection, we hope of investors recognizing the strength of the underlying fundamental performance of the business. And then as well, something that allows, again, that we hope as we continue to engage with investors going forward, we'll see, again, more of a reflection of our share price and the intrinsic performance of the business. So I think -- sorry, now we will take a quick pause and come back for Q&A.

Welcome back, everyone. We're ready to start the Q&A session. The first question is from [ Foong ] from Mirae Asset, and I'll direct this towards Bang. You've shared that the restructured loans may have peaked in both, absolute and relative numbers. Why do you feel confident that they have peaked? And if current conditions continue, how many of these loans or how much of these loans do you believe can be treated as normal again?

Thank you for the question. In terms of peak, I think one of the things, clearly, we're just seeing the trend, right? So from second quarter to third quarter, we have seen a decline in the overall restructured loans. And this is a function of people kind of getting back on schedule. And as we go through, again, the portfolio review, the quality is improving. So I think that it's a function of the economy, what we're seeing in the actual book, as I mentioned earlier, both on an absolute and a percentage basis. In terms of how we think about this as well, when you look at Circular 01, there were 2 qualifications. One was, it had to be impacted by COVID and then separately if there wasn't COVID, you wouldn't be able to -- you'd still be able to service your debt, right? So again, what we're seeing is, the activity is picking up in the business environment and a number of our customers are again getting back on track.

Another related question from Thanh of Maybank. So what were the new NPLs that were formed in the 9 months? And why were they so low, given the COVID situation? Was it because of Circular 01? And what we'd like to understand is, what would they have been without Circular 01? And what do you think will happen at the expiration of the circular?

I think I touched upon it on the answer to my last question. I wouldn't look at it as in terms of, what would it be without Circular 01. Again, Circular 01 was introduced to help companies manage through and for us, to help support them in this COVID environment. I think what we're looking at as we actively manage this is, what is the situation, how it's evolving? And so as we look at business performance and business plans of our customers, again, we are seeing a decline in the absolute numbers and percentage numbers. We do see that the NPL, if you look at again, Page 25 as an example. It has stabilized in terms of NPL formation. We have been tracking again B2, certainly for the last quarter. Most of the movement has been into B1, so performing again, and a small percentage going into [indiscernible] the NPL section. So when we look at it, as we kind of look through our portfolio quite actively, looking forward, if the Circular 01 were to be stopped at this point, our overall exposure in terms of an NPL, if you want to look at it, would still be under 1%.

Next question is from Ashish of Navis Capital, and we'll direct this to Jens. What was Techcombank's loan book exposure to real estate, including the corporate and retail loans at the -- and what was the bond exposure at the end of the third quarter?

So the exposure to real estate -- and if you take the overall kind of WB business banking book is roughly a quarter and so around 26%, 27% of the overall loan book. And then -- which I think is materially different, actually on the mortgage side, if you would look at that, that probably is around 1/3 of the overall loan book. But again, fundamentally, they are different because one is a kind of more diversified credit exposure against a multitude of different investors. Whereas the other ones, of course, is rather to construction companies to developers. So it's roughly, as I said, 25% on the wholesale banking side, 1/3 on the retail banking side.

Follow-up from home of ACB Securities. The -- Techcombank's exposure to real estate, as you said, was about 1/4 of the loan book, is relatively high in a cyclical sector. So how did you manage to weather so well out of COVID, given that what we think is a cyclical sector that's perceived to be harder hit by COVID?

So I think basically, this time, real estate behaved very countercyclical because it was mostly driven out of the secular trend. So the point was that given the liquidity in the market and given the fact that at least a lot of the buyer in our segment, which we are financing, which is rather up market, we're still actually pretty good standing, had the liquidity and had the cash, and they were actually willing to invest. So they were just continuing to buy real estate because they were seeing a little bit through the cycle. So therefore, we didn't see any kind of drops. At the same point in time, while real estate developers were slowing down a little bit, and we see that some of that stuff is now coming back but the underlying trends, why real estate, is actually a good sector coming from kind of a burdening middle-income class and from the fact that young households are forming and all of that, they're all holding. And again, this trend was maybe slowed down a little bit but has not really fundamentally broken through COVID. And therefore, as everything went down, and that one, because the decision-making was for a much longer period of time, actually held up very well. So as I said, was probably countercyclical.

And a follow-up on this from several people is, what is your plan on diversifying them, given that I think this question has come up a lot in terms of real estate concentration?

So again, I think -- and that is correct that on over the long term, we really want and to have a much broader, diversified book. On the other hand, what it also means is, actually we don't want to reduce our existing exposures because actually, we believe they are good. So what it means is, we need to expand into other areas where we have opportunities. And we clearly see, there are areas in FMCG. And there are probably areas in utilities and so there are, in other sectors we're going in. We are right now going pretty deep in understanding what could be the offerings? And we start going to some of our clients, which are also active in these sectors and to really understand, what could be the right value propositions? We're doing it exactly the same as we did it on the recon side. We try to understand. We try to understand the entire chain and then start banking the value chain. So as I said, utilities, FMCG which is a little bit the sectorial and diversification. But then I think there's also segment diversification given the fact that I think having exposure to kind of other segments, not so much ethylene and wholesale banking, but more on business banking, SME and mass affluent will actually also help us to diversify. So these are the areas we're going after. But we should also be clear, we will only be going in there if we have all the capabilities to really make sure that we completely control the risk. And I think the fact that we are standing right now at a relatively low NPL ratio and probably shows that we are really, really taking focus on managing that risk. So we're building the capabilities, and then we're expanding. But as I said, probably on sectorial, rather FMC utilities, some of the key foundational industries which are driving GDP and then in terms of segments and SME and probably down market from the affluent rather in the mass affluent areas. And but again, mostly collateralized.

The next question comes from Dhananjay from FIL. And this will be Bang, if you could answer this one. You said that cost/income ratio may increase as the bank accelerate spending on hiring people for the next 5 years. Where do you think CIR will go? What's your comfortable range? If you look over the next 2 to 3 years? And what do you believe is the stabilized level after that?

On CIR, I think probably that the key takeaways, we continue to manage all the kind of key cost drivers for the business and CIR in particular. If you look back at our track record, we've done a very good job. On a historical basis, we've said we wanted to manage kind of in the mid-30s. When you look at where the average for the sector is, it's high 30s, low 40s. I think for us, the discipline around costs, especially in a year like this, where we can kind of turn on and turn off as needed is something that we will continue to be very focused on in terms of maintaining, going forward. But importantly, what that allows us to do is to continue to selectively make investments where we can drive upside, right? So CIR is obviously a function of both, operating income -- total operating income and then cost. So where there's variable opportunities to invest and drive revenues, we certainly will make that. And that should still reflect a pretty good cost/income ratio. So I think overall, the way we'd say it is, as cost becomes important, we will -- we have a strategic advantage in terms of the gap between us and the rest of the sector to invest as we kind of roll out the strategy for the next couple of years. A lot of the investments will be, again, in driving investments in digitalization, improving the customer experience, increasing productivity and investing in where there are opportunities to drive operational efficiency. So somewhere certainly south of where our peer group is. And I think the mid-30s are a little bit higher than that will be somewhere around the areas that we'll be focused on. Thank you.

The next question is for Jens and comes from Han at Manulife Asset Management. Can you share some thoughts on the Bank of business? What are the growth targets that you have as we've seen some pretty impressive growth from some of your competitors and versus Recently, there has been more moderate growth from Techcombank's bank of business?

So thanks for the question. In terms of strategic priorities, Banca is still absolutely high on our list. We think it's a completely under-penetrated market. And as the market develops, and we will see much higher penetration rates. So from our perspective, especially with our focus on mass affluent, affluent customers, I think it's a core proposition. Have we been kind of disappointed with the current growth? And I think that's actually is a fair comment. I think -- and clearly, we see more ability than what we are currently able to bring to the market. Now in order to get this sorted on the other hand, we also want to make sure that we're actually doing it right. What I mean with that is I -- we really want to be very customer-centric. We want to make sure that we are selling the right products to the right customers at the right point in time. So we clearly want to make sure that we are not pushing products, which sometimes can be on the results if -- and we see very, very strong growth. And I think we've seen it in other markets that regulators have reacted very forcefully, when it came suddenly to mis-selling or people or the banks not really taking really good care of their customers. So what we're doing is, we clearly want to get the numbers up again. And we're doing it right now by making sure that we're strengthening our distribution model that all the people in which we want to engage with customers on insurance know exactly what they're doing, that we have the right products for them, if we're selling them in the right circumstances. And we're working with our Bank assurance partner to make sure that we can actually really get this value proposition out. So our aspiration is we should be at very different numbers. And the numbers are not where we are right now. So if we think through penetrations, I think we should easily have really significant double-digit growth over the next years without any problems. But again, we want to make sure that we're doing it actually right.

Just as a follow-up on that from Ling from SSI as the status of our relationship with our partner, Manulife, and any terms in there that allows parties to walk away?

So again, I think we are actually right now in very intensive discussions with Manulife and our partner to see how we can get these numbers up. And they are seeing exactly the same thing what we are seeing, which is there's huge potential and how can we make sure that we actually get this sorted. So they are giving us all the support we need and we are trying to align on our plans very, very closely. And in any contract which someone has entered into there are always clauses where one or the other party can break away and I think it's very fair to say nobody is looking at these clauses right now. So from that perspective, I think that's not anywhere in the card, but it's really much more about how can we make sure that we actually get this up and realizing the full potential. And again, there's nothing conceptually in the way why a partner like Manulife or ourselves who actually have shown again and again that we can be #1 in the segments we want to be in that we can actually not make this happen.

The next question comes from Jun at Dragon Capital, and this is for Bang. How much value of the bond underwriting was in the 9 months of 2020, there was a pretty significant year-over-year growth that resulted in about VND 900 billion in terms of fees for bond underwriting. And what is your outlook for the rest of 2020 and 2021?

Yes. So again, we had great contributions in bond income this year from the strength of the underwriting. So on Page 21 of the presentation, we were up 114% year-over-year on 9 months. So 52 trillion, which is basically double of what the volume was last year. What we saw this year was a lot more activity early part of the year, whereas last year, a lot of it was concentrated in the last quarter. I think that's just a function of customer demand. And so that pipeline was executed in the earlier part of this year. In terms of the outlook -- look, I think we've said, and we'll say it again, the bond business is a function again of knowing that our corporate customers continue to look for diversified sources of funding, we have seen healthy demand as we think about next year, we've seen a lot of issuance this year. I think it really comes down to how quickly the -- certainly, some of our corporate customers digest that. We are working with new customers as well. But a lot of that I think will just be a reflection of the shape and pace of recovery. I think overall, we have seen healthy growth, as you can see here over the last couple of years in terms of the issuance volume and importantly, also the distribution volume. So again, meeting needs on both sides of the business.

Bang, I guess, as a follow-up to that, you've talked about the volume increasing quite a bit year-over-year, but it seems like the fee might have increased even faster than that. So was it actually more profitable.

Yes. So again, good question. We're -- I think we're up 30 bps roughly on some of the -- from bundling of services. What we've done this year is as the market continues to mature, we're working with newer customers, corporate customers, the fee opportunity there is a little bit higher. So again, the average rates in terms of the activities will provide services we provide, particularly for first-time issuers we have been able to enjoy a bit of a higher margin on that business.

Another question for you, Bang, on bonds from [indiscernible] at IBS, Thanh at Maybank and Duong at Mirae. Do you make provision for bonds? And could you explain a little bit more about the mechanics there?

Yes, certainly. I think it comes down to the type of bonds. So for listed bonds, it's actually pretty conservative under VAS we take the lower of the issuance price or market is based on basically a 10-day average. For unlisted bonds, they're treated similar to loans under circular 02. So, essentially a general provision of 75 bps and then the staging based on buckets. So again, treated very much like loans.

Okay. Bonds is a popular topic today. So one more for you, Bang. Decree 81 has come into effect for about 2 months now. What is the impact that you see on the bond business for Techcombank and has there been any surprises or not, and this comes from Maybank and IBS?

So again, I think the secular trend or the general trend is the bond business will continue to grow in the years to come. I think that's just a fundamental need from the corporate market as that grows and outpaces the ability for banks to take on all of that growth capital requirement. As far as Decree 81 we certainly welcome it as the market matures. A lot of this is ultimately by the regulators to ensure a healthy sustainable growth in the market. clearly 2 parts to that. One is higher requirements on the issuer side. And then probably more importantly, is making sure that we're protecting investors and that they're qualified to invest in these bonds. So for us, I think given our market position and leadership, this is, I think, good for the entire market, in many ways, may manage out some of those that are on the fringe issuers or underwriters to again ensure that there's high quality issues coming to the market. And then I think the question really is what ends up happening for this coming year. As we've seen it, we haven't seen a lot of implications on the Decree 81 our corporate customers. These, again, more mature. They've come to market before multi-time. I think maybe on the margin that may, again, looking at some of the newer issuers, making sure that they do qualify. And I think if you look at the entire market, as the market absorbs the new regulations, there may be a bit of a bit of a transition as that happens. But I don't think that is certainly impacting us. We've been preparing for this for quite some time. Both on the issuer side as well as on the distribution side.

And just to clarify a little bit because there has been some report in the media of a pull-in effect, given the strength of the bond market, this issuance this year, do you think that that's happening?

I think on the margin for some of the other -- maybe some of the other securities firms and some of the issuers, again, for us, and not necessarily these were activities that were planned based on need. And again, we're working with the blue chip highest corporate customers, kind of large corporate customers, many of which have been either multi-time issuers or some of the newer ones of names that, again, are listed, have the right standards. And so I think maybe on balance in the market, but certainly less so with us.

Switching to credit growth. I will ask Jens to answer this. This comes from Maybank, FL and Navis. The credit growth in the 9 months this year has been relatively soft for both Techcombank and the banking sector in general. We've heard that the SPV has raised the credit limit for many of the banks. What is your outlook on Techcombank credit growth for the year, given the modest growth so far this year? And where do you think that the -- that growth will come from?

So the I think we actually will see a pickup in the last quarter. And there are quite some demand, some of the project, especially again in the real estate sector, where we have been postponed and are now coming online. So from that perspective, and we would actually still see an expansion and quite a pickup in the last quarter. So real estate sector would be one -- on wholesale banking overall and probably is in the area which will come in as some of the projects which had been a little bit kind of postponed our and people feel a little bit more confident again. And then again, and probably also I'm seeing some more on the mortgage side as some of the projects, as I said, basically really getting materialized and getting released into the market and customers are taking it up. So we would still expect clearly double-digit growth for the whole year. And we still actually trying to actively go and see that we can use the full quarter, which has been granted by the SPV.

Okay. And I missed one part of the question, which is do you expect the growth to come from loans or bonds?

It could be a combination could be actually a combination of both on some of that, which we just keep on the books and not start selling down because again, we think actually that is still attractive NIM for our own banking book. So again, probably it's a combination of the 2 of them.

Related to this also is in your macro overview, I think you spoke about the credit growth for next year for the sector increasing. So would you expect Techcombank's credit growth to be faster next year as well? And again, I guess, in what sectors do you expect to see a rebound versus this year?

So overall -- so 14% is for the industry. And our understanding is that this year, probably we got one of the highest quotas we would expect next year to have one of the highest quotas just because in terms of the -- some of the points Bank actually talked about, which is liquidity, which is capital. So we still expect next year to probably be stronger than this year. I think, ultimately, it will be kind of a rebound of some of the sectors. So I think real estate will still be strong, but we also want to diversify in some of the other sectors, so I think we want to be FMCG. And we want to see that we can expand actually [indiscernible] on our retail bank and our business banking book more. And so there will be certain efforts we are doing on the retail side, on the trading side. We're also right now very much on only in primary mortgages. There might be secondary mortgages we're also looking after. So and less wholesale banking from a segment point of view, but rather expanding the kind of business banking book and the retail banking book in order to get to our loan growth.

Thanks. So Jens, switching to a question on deposits. This comes from [indiscernible], Mirae Asset Management. We've noticed that the bank has lower deposit rates on some of the term deposits and whatnot and now has one of the lowest, if not the lowest rates in the market. Are you concerned that this would actually lead to customers leaving the bank that are paying higher rates for deposits?

A very good question. And we looked actually quite a bit into that. It's always if you're kind of have the cheapest kind of cost of funds in the market, you have to see, are you overstretching it. Now a lot of the cost of fund improvement actually came from a shift in our funding mix in CASA. And so what we're really looking very much to is our CASA customers running away. And are we seeing we are not doing anything there. And it's very clear our value proposition in that area, which is around cost and convenience is actually as strong as ever. And the fact that we have the cash back, the 0 fees and whereas a lot of other banks in the markets, and especially the big banks, are still charging actually is a very strong compelling proposition, which draws and customers. And we see an increase in the CASA balances. We see an increase in customers and because that's actually not where real price sensitivity is. Price sensitivity is around the term deposits and again, as we can replace more and more term deposits with CASA, we will continue to do so. And at this point in time, we just don't believe because the other ones are coming in that we need so much. So therefore, I think we can price a little bit more aggressively on the term deposits and rather actually pay for long-standing commitments, long-standing customers and where we're really making sure that we maintain that relationship. So we're going very much into the shift CASA to CASA in term deposits out as well as relationship-based pricing on the term deposits, which we want to keep. And that basically brings it down. So when we look at the numbers, we are not very concerned that we are getting into an area where we think this is not sustainable.

Next question comes from [indiscernible] at VCBF and [indiscernible] from Dragon Capital. And related to CASA, again, your NIMs are impressive and have continued to stay up here. You mentioned -- and also the CASA ratio has been increasing. Do you believe that this is sustainable and or maybe asked a different way, is there an upper limit to CASA and NIM?

So probably there are 2 questions, right? Is there a upper limit to CASA and is there upper limit to NIM? So upper limit to CASA, frankly, if you ask me, given our overall market share, I think the upper limit is probably 100% because a lot of other banks were really having strong franchises, they're operating at significantly higher CASA ratios, which we 60%, 70% or something like that. As I said, I think as long as we have a proposition, which clearly stands out compared to some of our competitors. And I don't see why we will not be able to increase CASA especially, and as Bang has mentioned, a lot of the CASA acquisition comes through digital channels, which in itself is not restricted to physical infrastructure, which was always a binding constraint to acquire. And clearly, that has shifted through COVID, and we're seeing that uptick. So I think there's still a lot of room. I think the -- and so therefore, we can shift, right? But at one point and time, you have shifted to -- the shift is not as meaningful anymore. And then the other one is yield on loans. So again, I think, basically, that is, are you shifting into higher-risk segments? Or are you shifting rather into long term than short term. So are you going in different areas of the interest rate curve. So I think that really comes down to the business segments we're going after. But we believe there will be especially over the next 18, 24 months, we have fight for quality. So good quality assets will be highly competed for. So again, I think -- will this continue to grow probably not. But I think we are still pretty confident that we can compensate the yield pressure by restructuring the funding side. So hopefully, we should be able actually to keep the NIM at the elevated level, which is better than what the industry is actually seeing.

Next question is on some of the write-offs and Bang this is for you. This comes from BSC, RBC and GMO. There was about a VND 1.4 trillion write-off in the third quarter and a total of VND 3.2 trillion write-off for the 9 months. Were these loans that were written off secured? And could you sell the collateral recover the amount? What is the sort of recovery experience that you've had on these types of loans.

Yes. So maybe just quickly, more than 90% of these loans have security, so they are collateralized. In terms of the recoveries, one, kind of if you think about the global standard, I think it's around 50% or so. If you look at our own track record over the last couple of years, we have actually been able to manage recoveries reasonably well, so at or above that level. I think if there was ever a time to kind of test that we did through the first 9 months of this year, we are still up 35% year-over-year with about VND 837 billion recoveries. We do see the opportunity to continue to recover certainly where these loans have this underlying collateral. So the answer is yes.

Okay. Bang, why don't you take this next one as well from a from BCBF. What was Techcombank's exposure to some of the hardest hit sectors, hospitality and tourism, airlines, and oil and gas at the end of the quarter for both loans and bonds.

Yes. So I think we did this exercise, obviously earlier during COVID in the first part of the year in terms of assessing exposure to those kind of most impacted sectors. We haven't really increased our exposure here. So it's about 3% of our loan book to those sectors. Importantly, when again, you look at our actual asset quality, again, it's reflective of, again, managing the risk across the entire portfolio. But in terms of actual exposure to these sectors, it's about 3%.

Okay. Jens, another question on concentration and diversification. What is the customer concentration for your top customers? And then what is your -- I think you talked before about the concentration for real estate. So this is more -- this is from Navis Capital on customer concentration as you looked at the top set of customers.

So there is, first of all, a regulatory hurdle rate, which basically says as an individual, you cannot lend to an individual more than 15% of your equity, and you cannot lend more than 25% of your equity to group of companies. So if you actually start translating that any individual could not take more than 3.5% of exposure or a group could be around 5.8%. So if you then go through, let's say, take the top 20 customers or something like that, and probably our exposure is on the loan side maybe makes around 20% of the book, which I think is given our market conditions and very much aligned to other markets and we go and be it like Philippines or Thailand where also a lot of the economic activity is actually sitting with a lot of very large conglomerates. And that's actually not too bad because in themselves, they actually have relatively diversified income streams, which helps to mitigate risk. So it's -- again, the answer is 20% on the loan side for the top 20 guys. Is this something we're uncomfortable with. And we actually did our due diligence on these top 20 names. And actually, that works pretty well for us.

Okay. The next question for Jens. This comes from Lin at SSI and several other people, and it's relating to dividend. When do you think Techcombank can start paying dividends?

Good question. Very good question, and I know it's kind of it's a little bit of an evergreen. So the first question is -- I think there are really 2 parts of it, right? The first part is what is an acceptable capital level with which we are feeling comfortable. And we know that we are running significantly higher than most of our peers. We talked about at 16.4%, whereas others are working with very different leverage ratios. We believe others will come closer to us and not us going down. And I said this beforehand. Now does it need to be 16.4%, can it be a little bit lower? Can it be 15%, 14%? Can we basically shift the mix a little bit. We can, and we are always looking actively at capital management. But I think I just want to reiterate the level of capital we are having is a capital, which we think, given the market conditions and some of the volatility we are seeing like in situations like right now, we're actually feeling comfortable with. So what that means is that if you want to maintain these levels, then you probably need for any kind of growth you're having, you need to finance it out of retained earnings if you don't want to ask for capital. So from that perspective, we believe that given our structure and the way how our balance sheet looks like, we would be -- we would like to grow even more because we believe we can easily get 20%, 25% year-on-year credit growth while still maintaining an 18% to 20% return on equity on the capital we are having. So from that perspective, we believe that if we want to continue to grow, which I think we need in order to be in the long term, a sustainable franchise. And we need to be on the growth trajectory we have been on. And with the cover requirements we have, that also means we need to have the kind of retained earnings in order to fund this growth. So from that perspective, and as has been talked about in 2014, where -- at an AGM, there was a decision made that for the next 10 years, we will not issue dividends as long as we can maintain our growth trajectory, which we think we can and probably shareholders are best served to actually keep the money in the bank and get the returns of 18%, 20%. Of course, that is ultimately up to the Board to decide the dividend policy and all of that. But that is a discussion we're continuously having with the Board as the representatives of the shareholders and they will have to take a look at this. But again, I think they right now share the perspective that we can actually recycle a lot of these retained earnings and very productive investments. So from that perspective, probably we keep the money and not turn towards a dividend policy.

Follow-up from AFC. So what those attractive retain on equity, you've shown a chart in the past to show how that relates to valuation multiples. But from an investor standpoint, one of the ways that investors get paid is on getting a return of cash. But how does management's incentive align so that the share price and rewards to shareholders will be aligned with what -- the business results from the bank?

I think that's a great and very simple and straightforward question, right? So I think that actually also is a relatively simple and straightforward answer. All the management, incoming management, existing management at the top level is kind of getting paid in parts with equity. So my incentives, our incentives is very clearly aligned with the stock price. So the higher the share price and the better for everyone. For management as well as the investors. And we're clearly designing it that way. And so from that perspective, I would have to buy in exactly the story I just said that I believe that recycling or retaining dividends and putting them back into the business at 20% and return on equity is actually a shareholder value creating and move. And so we are exactly on the same page.

Okay. Next question is for Bang. This is on a little bit more detail on B2 formation, the special mention loans. And in one of the charts you showed earlier, this is from Tom from BSE, you showed that there was a drop of VND 5 billion net reduction in the Bucket 2 loans. What is the reason for the movement of these 2?

Yes. Great question. So I think the reality is B2, you have 2 opportunities. One is you're moving back up into B1 performing or you're moving into another lever or off, right, off meaning that it comes off your books. So as I mentioned earlier, the VND 5,000 sorry, VND 5.5 billion -- VND 5.5 trillion that came off in the third quarter, most of that actually went back into a B1 bucket. So the majority of that went back up. So it's just a function of, again, moving up, moving down or out. And in the case of -- as we said, we're seeing improving asset quality that's reflected again in the movement back to be one.

Okay. Jens, a question for you from Dragon Capital and Navis on strategy and 5-year plan. We've heard before that management said that the bank is working on a new 5-year plan. You just joined the bank as well. What are some of the things that you can share with us on the next 5 years? And are there going to be any key changes that you see going forward?

So we are in the midst of really finalizing the 5-year strategy. So I think it's probably better to share some of that in the next time we meet. I believe a lot of the kind of fundamentals, which is we're basically going after the sectors which are kind of fundamentally in line with the growth of the economy. And we're going for high quality, and we're going for rather upper end of the pyramid. I think that all remains intact because I think the story is still intact. However, they are probably for lack of a better approach, maybe there's kind of 3 Ds which will probably happen, right? So the first one is digitization. So I know everyone is talking about it, but I think we will put a real effort into making sure that we actually are digitizing our business models, we see the success we see that it allows us scalability, which is very different. And then we go with the traditional approach, and it also allows us actually to really scale and be at models where we probably can break the kind of growth trajectory in terms of costs where everything we would do when we're growing would actually be also commensurate on the other side with a proportional amount of cost increase. So I think digitization is from an economic efficiency as well as from a productivity and from a convenience perspective, something we will have to do. The second one is data. And data is -- we really believe ultimately that this is what will differentiate. So we want to be really insight-driven if we want to be there when the customer actually needs us, we have to get better customer insights, and that ultimately will be coming down to data. So and digitization allows us also to capture data to process data and to feed data back into the business models very, very differently. And the last year's diversification, we talked about it. I think if we're having these better insights if we have the right models, it allows us to go economically and from a risk perspective and segments, we might not have been willing to venture beforehand. So these 3 are in the right combination will probably be at the core of what we are doing. And as I said, we are right now really in the process of saying and translating that in we tangible action. What does it mean? And what does this mean to our business? What does it mean to our investments the fact what banks said, we have created the room, the headroom to invest. We talked about in the past, we made a statement that we want over the next 5 years to invest and USD 300 million or more than USD 300 million in technology. I think that probably defines the lower boundary. But as we said, given the fact if we continue on the revenue trajectory, we can actually afford that. And so POI growth as well as cost discipline on all levers is important. But as I said, as long as we are having the funds and we can invest, I think digitization data and diversification will be some of the key pillars we will find when we come back and talk about the strategy.

Okay. Jens, maybe a little bit related to this is a question from Thanh at Maybank Kim Eng. A lot of banks have actually copied Techcombank's 0 fee program. We're seeing other banks follow that. Do you expect that to have a significant impact on your CASA franchise when other banks follow suit?

So I think that's a very good question. And I don't think we can -- and we should not answer strategic questions of our competitors. And so I don't know what they are doing. As you rightfully said, people have followed, but others have not, right? And I think the ones which probably have started are kind of smaller guys like us to a certain extent, right, because there's not so much to lose. But there are a lot of other banks who have huge parts of their profits still riding on fees, on transaction fees. And for them going and following would be quite a daring move, right? And so I'm not quite sure if a lot of the larger banks could easily copy that move. And so right now, we are not seeing any kind of slowing down. And we have not put a lot of marketing actually in some of these activities as we see when we are putting the platforms out we see actually an increase. If we would really start accelerating that, I think we could actually go even faster. Some of the reasons we are not doing it even at this point in time is that our system might not be able to cope with the capacity and the transaction volumes, which are coming in. So I think what we are doing right now is to probably rather build up relatively quickly capacity to handle more customers coming in. So I -- I'm really not too concerned about it because I really believe that some of the other banks will just economically not able to follow as quickly, and I think there's still a lot of customers who can benefit from these offers.

Just a follow-up on that. Do you believe that as a first mover with 0 fee, there's any cost advantages over the banks that want to follow.

Yes. I mean, usually, of course, everything is a little bit different. But if you do some of the analysis in the past, and usually and there's a higher chance at least in some of the countries are worked and that you get divorced than that you change your bank account, right? So therefore, if we get someone in at the beginning, with a word of mouth because people are saying it's quite a unique proposition. And then you're doing things right. There is a real point why would people choose to leave if you have a good proposition. So from that perspective, I think rather right now is scrubbing the market and being actively out there than waiting and wait that the inevitable is happening anyway. So from our perspective, we actually still think there was a pretty good move. And we still very clearly want to still continue to write on that wave for as long as others are not following but again, I agree it might not be as unique as it used to be.

Right. And sorry, a follow-up from [indiscernible] In terms of the fees that the bank has to pay when a lot of the transactions are happening on us versus a way I guess as the largest one in the market, is there some advantage to that you see that is sustainable in terms of the cost of the each transaction?

So a lot of these fees are also a lot of in flux, right? So I think, ultimately, the way how we should think about it is it comes a little bit back to it. First one is CASA compared to term deposits still has a 3% margin advantage, right? So you can pay a lot of fees for that, and it would still not -- would still justify -- and secondly, I think the pure amount of data you can collect and the engagement you're getting is worth a lot. So I really believe, ultimately, payments for banks will be a business which will be cost of acquisition and cost of doing business. So and I think you can now try to optimize and -- but I would not think too much about how to make money out of payments. Probably it's rather a tool or a means to an end. And from that perspective, again, I think more people transacting with us, the more they engage, the more we learn and the more we have a chance to really serve them better with higher value-added products. So from that perspective, it could be an advantage. It could be a disadvantage. As I said, at this point in time, we are actually in a nice situation that the margin difference on the deposits still cover -- but -- and as I said, I think, ultimately, the ultimate ratio and logic for that is any way we need the data.

Okay. Thanks. We have time for 2 more questions. Next question is for Bang. Bang, on the last -- this is from EN Capital. On the last slide that you showed, it showed volume increased a lot recently. What is the -- what do you think is driving all of that because it's pretty big jump in terms of trading volume.

Sure. As I mentioned earlier, I think the one thing just to set the context, the month of October, we saw quite a bit of activity across the entire sector. However, volumes for our bank was significantly still above that. If you just look at, again, the run rate, if you will, really almost 3.5x, 4x the volume from the month of September, which was VND 7.5 million. And then over the period before that 2 million to 3 million shares a day. So a couple of things we're certainly seeing now. One, there's a greater rotation of shareholders. We've nearly doubled the number of shareholders in the month of October. So we certainly are seeing new investors coming in to the stock. I think based on conversations we've been having and certainly, the results that we've been able to share over the last several quarters. One is just the overall strength of the results. And it's not just kind of one quarter. It has been 2 consecutive quarters now. So I think there's certainly a recognition of consistent performance. Two, as we've outlined in previous discussions with [indiscernible] presentations is the importance of continuing to engage and improve our engagement with investors and in particular, domestic investors that -- we want to make sure they understand our story better. I think we pointed out in the slide just before this, which was the kind of the growing advantage we have in terms of operating metrics and what that means for us in terms of being able to drive kind of strategic decisions going forward as we come out of this COVID period. So those are, I'd say, some of the things that we have seen. I think we will continue to engage with investors. Clearly, it's important, as Jens mentioned earlier, to be very aligned with creating shareholder value over time. We've been particularly focused on just driving the business, making the boat heavier, increasing the strength of our balance sheet. But increasingly, we want to make sure that, that's a medium, long term as well driving that into the performance of the stock price.

And last question is somewhat related to that from Kevin of [indiscernible]. Jens, why don't you take this one? What does management believe to be the biggest gap between the stock price or stock market perception and the fundamentals of the bank.

Well, good question. I wouldn't say it beats me. But I think the question probably is there's still probably a question of consistency. And as people are observing and we see the questions coming still in terms of concentration risk are there? Is the whole income base is diversified enough? And is it basically exposed to certain elements if some of these breaks away is suddenly the performance going away. Now you could argue, well, at least for the last 20 quarters, it was okay. And so -- but we would actually honor and acknowledge that we're saying we need a broader diversification, but we have to do still more education to tell and have investors understand why we actually believe that the choices we are doing are actually prudent in terms of risk management and are actually optimizing risk return, which is superior to what other banks would be doing. So again, I think there's still an educational element. And I think there is a second element of still asking is this effective capital deployment, right? Why are -- why is this bank so much more capitalized than a lot of the other guys. So either, what are you seeing, are you sloppy in the use of capital. And again, as I said, we believe probably rather that over time, people will come to us. And right now, basically taking it or paying it out in order to collect it back as long as we can deploy it effectively, as I said, the 18% to 20% range. It's probably something different, but we will still look into the optimization of capital management. Again, there is probably something which still needs to be done. And then I think there is a third one, which is just, usually, people are looking a little bit for, or you say, catalytic events, right, that you are saying, oh, there is -- and there's a story around an IPO or and you go somewhere else or there is a pending M&A and all of this, right? And again, I think we are not so much in the business of doing kind of rumors. But I think it's probably fair to say, as I also said beforehand, I think we do a lot of investments right now, which can scale, right? And so we are we're looking at deploying capital in the most effective way. And probably, right now, we could probably even grow the book more aggressively than what we can currently do because of certain caps. So if there are ways to break away from that meaningfully and which could be demonstrated, again, that could be some of these catalytic events, right? But again, we are not managing actively for that. So at this point in time, I would say it's mostly probably trying to optimize some of the capital at the margin without going down. And the other one is really having people understand what we are doing that we are not taking excessive risk, but we are basically just picking the right opportunities while at the same point in time looking for other opportunities, which fulfill the same criteria. And probably that is where we'd say we will focus on over the next couple of quarters to make this more and more and clear to the investor community.

Great. Thank you, Jens and Bang. That concludes today's analyst presentation for the third quarter 2020. Thanks again, and we will see you next quarter.