VietinBank opens its Vientiane branch

The finance and banking sector has always been the leader in Vietnam’s outward investments.

Vietcombank, one of the ‘big four’ state-owned banks, recently opened Vietcombank Laos, its first overseas subsidiary bank. Many other Vietnamese banks, BIDV (Bank for Investment & Development of Vietnam), SHB, Military Bank, Sacombank and VietinBank, are in Laos.

On November 28, VietinBank inaugurated its Vientiane branch. This is the second branch of VietinBank Laos after the first branch was upgraded into a bank.

Vietnam’s banks have had satisfactory business performance overseas. SHB, for example, reported revenue of VND192 billion from overseas operations in 2017 which was equal to 10 percent of the bank’s pre-tax profit.

However, the banks’ outward investments remain very modest. An expert noted that Vietnam recently has entered neighboring markets such as Laos, Cambodia and Myanmar. 

In general, commercial banks open branches overseas to serve enterprises from the same countries which do business in overseas markets, or they target markets where there are large communities of Vietnamese. This explains why Laos, Cambodia and Myanmar are the favorite markets for Vietnam’s banks.

Under the national strategy on banking sector development, Vietnam expects to have two to three banks listed among the top 100 Asian banks in terms of total assets, and to have three to five banks list their shares on foreign bourses. 

However, opening a representative office or one branch overseas is costly. Banks need to have many customers in the targeted markets and make enough revenue to cover expenses and make a profit. 

In developed markets, the competition is stiff. Many Vietnamese banks still cannot meet international standards, which is why they find it difficult to enter the US or European markets.

The implementation of FTAs (free trade agreement), especially the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), is expected to open new markets for Vietnamese banks However, this will still depend on how banks grab the opportunity.

Nguyen Tri Hieu, a respected banking expert, said in the time to come, banks may consider opening branches or legal entities in Malaysia, Indonesia and the Philippines. Africa is considered a potential market for Vietnam, but only for exports, not for finance and banking services.

US$1=VND22,000

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