Return on equity (ROE) & Return on asset (ROA)

“Return on equity (ROE) is a measure of financial performance calculated by dividing net

income by shareholders' equity”(Return on Equity – ROE, Marshall Hargrave)
https://www.investopedia.com/terms/r/returnonequity.asp. In other words, it measures the profitability
of a corporation in relation to stockholders’ equity. ROE is also considered as the return on net assets
because a company’s assets minus its debt is equal to shareholders' equity. The higher ROE, the more
efficient a company management is at generating income and growth from its equity financing. It is
basically calculated by the following formula:

Net Income
𝑅𝑂𝐸 =
Total Equity Capital

The below line graph illustrates the rate of ROE from 2011 to the first half of 2017

ROE %

30
28.87
25
21.59

20 17.5

15

9.73
10
7.40

5 5.60
4.70
0

2011 2012 2013 2014 2015 2016 1H2017

As can be seen from the line graph, in 2011 the percentage of ROE was highest and peaked of nearly 30%
( 28.87%). Conversely, this figure fell significantly to 5.6% in 2012 and reached the lowest point of 4.7%
in the next year. In two years later, the slight rise was recorded in the ratio of Return On Equity by 5.03%
( from 4.7% to 9.73%). Between 2015 and first half of 2017, ROE proportion increased remarkably by
about 12% ( from 9.73% to 21.59%), but this figure was still lower than that in 2011. Overall, the rate of
Return On Equity is fluctuation during seven years. Therefore, Techcombank maintained the ratio highly
at the end of period. This result shows the effective of using company’s capital and assets management.
Follow one of the data in website Thoi BaoTai Chinh Viet Nam which is reported in 31 Augst, 2018,
ROE of Techcombank increased dramatically and reached of 30.7%. In addition, in 2017, Techcombank
was rated by the Asian magazineer magazine as the Top 2 banks in Vietnam for long-term profitability
from core business as well as is upgraded credit outlook by credit rating organization Standard & Poor's.
Remarkablely, the ROE data low between 2012 and 2014. Explaination for this fluctuation, as can be seen
clearly that Techcombank always proactively complied with the application of credit risk management
and focuses on managing operational risks for the system in order to ensure that the bank grows
sustainablely. In particular, Techcombank has been a pioneer bank in the implementation and application
sucessfully of IFRS9 since January 1, 2018 (Techcombank,11/6/2019). However, in the period from 2012
and 2014, because of changing of General Manager from Nguyen Duc Vinh to Simon Morris ( Chinh
Chung, 2013). That leads to change in techcombank’s strategy, system and tagets.

http://thoibaotaichinhvietnam.vn/pages/tien-te-bao-hiem/2013-09-05/vi-sao-loi-nhuan-techcombank-sut-
giam-manh-3229.aspx

https://baodatviet.vn/kinh-te/ket-qua-kinh-doanh-techcombank-nam-2015-tang-truong-ben-vung-
3300520/

https://techcombank.com.vn/gioi-thieu/goc-bao-chi/thong-cao-bao-chi/techcombank-chinh-thuc-duoc-
ngan-hang-nha-nuoc-trao-quyet-dinh-ap-dung-chuan-muc-basel-ii

http://thoibaotaichinhvietnam.vn/pages/tien-te-bao-hiem/2018-01-31/techcombank-nam-thu-3-lien-tiep-
co-loi-nhuan-tang-gap-thep-53338.aspx

(roa, định nghĩa )

ROA (%)

2,5

1.85
1.83
1.49
1,5

1,0 0.86
0.63
0,5 0.39
0.42

0,0

2011 2012 2013 2014 2015 2016 1H2017

The above line graph shows the rate of Return On Asset of Techcombank from 2011 to the first half of
2017. Overall, there is the quite same the line of ROE rate. In other words, ROA rate was not stable
during seven years, but still was high at the year end of the period. At the first year of the period, the ratio
of ROA was high ( up to 1.83%) and only ranked behind ROA rate in the end of the period (1.85%). In
the next year, a significant decrease was witnessed in proportion of ROE at 0.42%. This figure was nearly
unchanged during one year later ( from 0.42% to 0.39%) and slightly grew up in 2 years after ( 0.63% and
0.86% respectively). The reason for this remarkable reduce were the economic difficulties and large
liquidity surplus in all banks. They leaded to lend difficulty and create pressure to reduce interest rates.
Interest income tended to decrease from 2012 to 2014. ROA increased by approximately 1% from 0.86%
to 1.85% in the last two years of the period thanks to maintaining good net interest margin (NIM). In
addition, the bank has focused on managing deposit costs through increasing the density of continuous
deposits over the years. The net wage rate has increased, in which the premium for insurance services has
steadily increased.(Huyen Trang) http://cocobay.edu.vn/ceo-techcombank-khong-tap-trung-tang-du-no/