Public Bank Vietnam (PBVN), a wholly-owned subsidiary of Malaysia’s Public Bank Bhd, secured approval from the State Bank of Vietnam (SBV) in early July to open three additional branches and two more transaction offices this year in Hanoi, Ho Chi Minh City, and Da Nang, bringing its branch numbers in the country to 19. 

The move is in line with its aim of expanding its network and customer reach in Vietnam, and a growing number of other foreign players are also looking to capture the wealth of opportunities in the country’s banking sector, with South Korean banks leading the charge.

South Korean lenders have been eagerly expanding their foothold in the country. Woori Bank received licenses from the SBV in June to open five more branches in northern and southern cities together with a transaction office in Ho Chi Minh City’s District 7. Shinhan Bank, meanwhile, opened four branches and transaction offices in Ho Chi Minh City and Hanoi in May, beefing up its nationwide network to 30.

Singapore’s United Overseas Bank (UOB) held a ceremony two months ago to incorporate its fully-owned subsidiary in Vietnam, making it the first Singaporean bank to open a foreign-owned subsidiary bank in the country, having operated with a branch license since 1995. Earlier this year, Standard Chartered Vietnam opened a new full-service branch in Ho Chi Minh City’s District 7, bringing its branch numbers in the country to four. 

Apart from enlarging their transaction networks, some foreign banks have been sinking in more investment capital and extending the operations of their representative offices to increase market share, especially in retail banking. The Bank of China (Hong Kong), Ho Chi Minh City Branch, for example, received permission in May to increase its charter capital from $80 million to $100 million. Just prior to that, the SBV also granted permission to the Hanoi branch of South Korea’s Nong Hyup Bank to increase its charter capital from $35 million to $80 million. The Singapore-based DBS Bank in Hanoi and Thailand’s JCB International also sought permission to extend their tenure for an additional five years, in March and April, respectively.

Vietnam has licensed around ten wholly foreign-owned banks to date, including HSBC Vietnam, Standard Chartered Vietnam, Hong Leong Vietnam, and Shinhan Bank Vietnam. Some recorded better business results in 2017 than local counterparts of the same scale in terms of capital and assets.

Though having smaller networks, foreign banks in Vietnam possess strong financial resources, experience, and modern technology that instills confidence among local customers, according to Mr. Nguyen Hong Khanh, Head of Analysis and Research at Vietnam International Securities (VIS). “Quality services and professionalism are the major advantages of foreign banks in Vietnam,” he said. “Thus, in terms of business performance in capital and assets, they have a higher ratio than local banks given they focus on advantageous customer segments and utilize their strengths.”

Foreign bank networks in Vietnam

Source: VET research, 2018

Seizing the potential

Foreign banks have been accelerating their investment and expanding their Vietnamese subsidiaries with the aim of tapping into a consumer finance market that could be worth $44 billion by 2020. Shinhan Bank is the largest foreign bank in the country by branch numbers, and with the recent purchase of ANZ’s retail banking business signaled its intention to continue to chase the retail market. It accounted for about 1.2 per cent of total banking assets (pro-forma, including ANZ) by the end of 2017, according to Mr. Long Ngo, Associate Director of the Research Department at Viet Capital Securities (VCSC).

Mr. Shin Dong Min, CEO of Shinhan Bank Vietnam, said it made intensive and extensive preparations years ago to enter the retail banking business, with investments in personnel, technology, and products together with improvements in procedures to seek opportunities to grow its market share, including any viable mergers and acquisitions. “This strategic direction has worked and helped the bank secure a firm market share in retail banking and we will continue to thrive in the future,” he said.

Vietnam continues to enjoy high economic growth that has stimulated huge interest and opportunities for FDI, with over half the population being of working age and a rising middle class. Figures from eMarketer last year showed that Vietnam is very much open to technology, with 55 per cent of the population being internet users and 46 per cent owning smartphones. “We are witnessing consumers shifting to shop online using smartphones,” said Mr. Sabbir Ahmed, Head of Retail Banking and Wealth Management at HSBC Vietnam. “All of these factors drive growth in consumption and the need for personal financial services, including mobile payments.”

HSBC Vietnam has its own edge. “Our rich experience in different markets allows us to introduce to the local market a strong portfolio ranging from vanilla banking products to sophisticated solutions such as wealth management,” he told VET. “This means customers can access one-stop services for all their evolving financial needs. Our global network also puts us in an ideal position to provide financial solutions to individuals with ambitions to head overseas for education, travel or work, which is clearly a growing trend in Vietnam nowadays.”

Standard Chartered Vietnam, meanwhile, has invested significantly in retail banking over the last 18 months, which has gone towards engaging more staff, expanding its distribution network, and introduction cutting-edge propositions. “This has enabled us to develop our business substantially and create strong momentum for further growth,” said Mr. Harmander Mahal, Head of Retail Banking at Standard Chartered Bank (Vietnam). “As our investment in Vietnam continues, we hope to be able to benefit more clients with our world-class products and services, thus boosting our business further.”

Digital race

While strong in capital resources and with better customer services, their limited scale remains a major issue for foreign banks in competing with local banks in retail banking, according to Ms. Dinh Phuong Anh, Banking Analyst at VCSC. “The benefits of embracing advanced fintech in retail banking are compelling in Vietnam, which help banks not only acquire customers through new distribution channels to reach unbanked communities, which is 69 per cent of Vietnam’s population as of 2017, but also to enhance customer services and improve operational efficiency,” she said. “Partnerships between fintechs and foreign banks in Vietnam, however, are few.” 

HSBC Vietnam is one to prioritize partnering with fintechs. “For instance, our partnership with VietUnion enables customers to settle their credit card balance at over 5,000 convenience stores and retail outlets using Payoo instead of visiting a branch or ATM or using internet banking,” Mr. Ahmed said. 

Digitization is an overall focus in Standard Chartered’s retail banking development strategy and it will substantially boost its investment in digital platforms to provide more convenience. “Our aim is to be a digital bank with a human touch,” Mr. Mahal said. “We have recently put into operation our biometric recognition safe deposit locker; the first of its kind in Vietnam. We have also launched a fingerprint and face recognition feature on mobile banking apps and continue leveraging the combination of our strong physical presence and innovative digital capabilities to provide clients with a first-rate banking experience.” 

All banks in Vietnam are doing what they can to increase their market share, Mr. Shin said. “In such a highly competitive environment, retail bankers must struggle to adapt with political and economic, social and demographic changes in existing and potential markets, as well as in risk management capacity,” he believes. “Only banks that have the ability to forecast, adapt and change flexibly to the market can survive and go on.”

VN Economic Times