Financial services industry during the Covid-19 pandemic
By the beginning of April 2020 , many international organizations have analyzed and updated the impact of the Covid pandemic- 19 and building world economic growth scenarios in 2020. According to the base scenario of Citi Research (announced on 7/4/2020), world economy will recession, growth -2 , 3% in 2020 (compared with 2.6% growth in 2019, more recession than -1.7% in 2009), of which China\’s GDP growth is only about 2.4% ( vs. 6.1% increase in 2019), US -2.6% (vs. 2.3% increase in 2019), Japan -1.9% (vs. 0.7% increase per year) 2019) and the Eurozone even grew -8.4% (compared with 1.2% growth in 2019).
As for Vietnam , it can be seen that Vietnam is a country strongly and directly affected by both the demand and the supply side. Finance-banking-insurance sector saw a slight decrease in revenue in Q1 / 2020 (-2%) over the same period, as this is an area affected by many indirect effects. and there is a lag (customers are in difficulty, begin to reduce service usage, poor capital absorption and bad debt are likely to increase sharply) and is assessed by investors as potentially risky, causing stock prices strong coupons (over 20%) compared to the beginning of the year.
Specifically, for banking industry , the general difficulties of the economy have directly affected customers\’ credit needs (by the end of Q1 / 2020, credit growth of 1.3%, much lower than the 3.2% increase in the same period in 2019, according to the State Bank of Vietnam, reduces revenue, as well as increases the risk of bad debt due to difficulties and implementation for customers More preferential loans to save customers. In addition, the rescheduling, debt delay and reduction of interest and fees will also reduce the revenue and profit of banks; causing the bank\’s share price to drop sharply (-22.4%) compared to the beginning of the year.
On the stock market , the negative effects of the epidemic are clearly reflected. By the end of March 31, 2020, the VN-Index plunged (-31%) compared to the beginning of the year, foreign investors were net sellers for 33 consecutive days with a net selling value of about 9,200 in the first quarter. billions dong; Stock prices of securities companies decreased by 28% YTD.
Insurance sector also suffered double impact: (i) demand for insurance services (both life and non-life) was reduced due to buyers with economic and income difficulties; and (ii) the rate of insurance payment (especially health insurance increase) causes the industry\’s revenue to decrease. Shares of insurance companies fell sharply (-35.2%) compared to the beginning of the year.
Although the State Bank of Vietnam has promptly and drastically implemented policy solutions such as: flexibly operating monetary policy instruments, exchange rates, rescheduling debt repayment terms, interest exemption and reduction. , keeping the debt group, exempting or reducing payment fees … but financial services businesses should be proactive with their own policies to deal with the current prolonged epidemic situation. Some solutions for businesses in the financial sector to pay attention are as follows:
Protect employees: In today\’s competitive labor market, human resources is one of the markets with big shift. The enterprise\’s policies towards employees during the crisis period are very important to create trust and retain employees in the context of banking, securities and security transactions. danger must still take place normally. In addition, the stability of human resources will create a sense of confidence and avoid confusion for customers and partners who are very sensitive to small fluctuations of banks or finance companies. To protect workers, businesses need to clearly communicate supportive policies that enable employees to complete their jobs and fulfill their responsibilities with family and society in joint efforts to prevent them. virus. Measures should be taken to protect the safety of employees while working and in contact with customers.
In the field of financial services, business activities must still be maintained to ensure the flow of capital for all economic activities and social life. Customers always have a need to use financial services despite pandemic and quarantine orders. Therefore, organizations providing financial services must ensure continuity in their service delivery. In addition, how to deal with Covid-19 related issues such as travel and health insurance, portfolio performance and online payment methods attracts the interest of partners. and customers. This is the time when the digital technology of the financial industry takes advantage of its strength to access and bring high quality services to customers.
Financial Services companies need to know their capital and liquidity in order to assess resilience. Central banks are under pressure to provide economic stimulus packages to compensate for the crisis, liquidity tends to spread and is systematic, thereby reducing borrowing costs. However, there are risks when many businesses hoard cash and open credit lines to be able to overcome this crisis.
Communication and transparency
When business activities are affected by epidemics, financial services units such as banks, insurance, securities, funds, etc. are closely connected with businesses. organizations and individuals ensure resources for economic activities as well as maintain social activities. Crisis, if not communicated in a transparent way, will obviously be the cradle to spread confusing rumors and create public sentiment, negatively affecting anti-epidemic and, more importantly, disrupting the economy. practice. Therefore, more than anyone, the financial services business must ensure that the information is always up to date and transparent, understand the process and how to handle the crisis.
Must have a plan for each scenario
After the Covid-19 pandemic, there will be a global economic crisis of a very serious level. Coping with the difficult pandemic period, overcoming the post-pandemic recession will be a huge challenge for the whole economy. Financial services companies will have to be prepared to deal with that difficult reality. They will not only find solutions for themselves, but also provide solutions for their customers. Therefore, companies providing financial services need to take into account different scenarios and, respectively, different solutions.
Institute for Strategic Leadership Development (SLEADER) synthesizes