VietNamNet Bridge – While Vietnamese banks are taking their first steps towards the retail banking market, foreign banks continue their expansion at a rapid rate.  

Lending to businesses once was the main source of income for the majority of Vietnamese commercial banks, which brought 80 percent of total revenue.

However, things are quite different. Banks now tend to focus on making money from banking services rather than credit. The average ratio of revenue from banking services of the total revenue of the seven listed banks increased from 19.9 percent in 2012 to 22.7 percent in 2013.

The seven listed banks include Vietinbank, BIDV, Eximbank, Vietcombank, Military Bank, ACB and Sacombank.

A report from KPMG, an auditing & finance service firm, has pointed out that bigger banks have higher proportions of revenue from services.

In 2013, revenue from non-credit services of the four banks with the biggest total assets in Vietnam was 19 percent, higher than the 14 percent of the entire banking system.

Sacombank’s proportion of non-credit revenue climbed to 38 percent, the highest level among listed banks.  Sacombank has the largest retail network among privately run banks.

Nhip Cau Dau Tu has quoted a senior executive of an US-based banking consultancy firm as saying that the Vietnamese retail banking market is still in its infancy, which is an attractive reason for banks to jump into the market.

The expert cited figures that the number of credit cards in 2013 increased sharply by 50 percent over 2012 and the number of debit cards by 20 percent, evidence that the banks were paying more attention to the retail banking sector.

However, though banking services are becoming more diversified, the banks’ market penetration rate is still modest at 21 percent, relatively low if compared with other regional countries, according to VPBS, a securities company.

While domestic bankers are considered “rookies” in the retail banking market, foreign banks are “veterans” and have been in the market for years.

The Hong Kong and Shanghai Banking Corporation (HSBC) has raised its chartered capital from VND3 trillion to VND7.528 trillion. Meanwhile, ANZ has drawn up a long-term strategy to develop its retail banking services in Vietnam.

“Vietnam is a key market for ANZ,” said Sanjoy Sen, retail banking director of ANZ Asia Pacific at a meeting with the Vietnamese press.

Meanwhile, ANZ Vietnam’s Retail Banking Director Duong Duc Hung said the retail banking sector was satisfactory with a two-digit growth rate in 2013.

ANZ recently relocated its transaction office from District 1 to Tan Binh District in HCM City. Hung said the bank wants to set up branches in the areas where there are many businesses and potential customers, i.e., in areas with high and above-average incomes.

These customers not only are willing to pay more for services, but also have knowledge and favor modern banking services.

ANZ and HSBC, as foreign banks, cannot open as many branches as they want because of the legal limitations. Therefore, the banks have been trying to approach customers through different channels.

According to Boston Consulting Group, Vietnam had 12 million middle-class income earners in 2012, and the figure is expected to rise to 30 million by 2020.

NCDT