The monetary market in 2018 witnessed a strong development of foreign credit institutions in Vietnam. Most prominent is the fact that United Overseas Bank (UOB) of Singapore upgraded its Vietnam branch to a 100 percent subsidiary bank. With the presence of UOB Vietnam, there are totally nine foreign-owned banks including HSBC (Hong Kong), ANZ (Australia), Standard Chartered, Shinhan Bank (Korea), Hong Leong Bank (members of Hong Leong GroupMalaysia), CitiBank, CIMB (Malaysia), Public Bank Berhad (Malaysia) and UOB (Singapore).
The number of foreign bank branches also increased with the participation of many new faces such as Kookmin BankHanoi branch with the granted capital of $35 million. While many representative offices of foreign banks also ask for extension of operation time.
Not only increasing in number, the financial capacity of foreign credit institutions in Vietnam has also been raised. Accordingly, since the beginning of the year, there have been many branches of foreign bank with additional capital injected by the parent banks. For example, in May 2018, the State Bank of Vietnam (SBV) approved two foreign bank branches to raise capital, namely NongHuyp BankHanoi Branch increased its capital from $35 million to $80 million and Bank of ChinaHCM City branch increased its capital from $80 million to $100 million. Previously, in March, Siam Bank HCM City branch also raised its capital to $100.47 million.
Foreign financial institutions have also continuously expanded market share in the Vietnam over the past year. For example, just opened in a short time, at the end of 2018, UOB Vietnam opened a new branch in Hanoi. Previously, another 100 percent foreign-owned bank, Public Bank Vietnam Limited, also opened three branches and two transaction offices, raising its trading networks to 18 branches and transaction offices in big provinces and cities of Vietnam.
Woori Bank Vietnam also opened five new branches and one new transaction base, mainly in provinces with large industrial zones like Thai Nguyen, Ha Nam and Binh Duong. Currently, 100 percent foreign owned bank with the largest network in Vietnam is Shinhan Bank. With the opening of four new branches and transaction offices in the two largest cities in the country last year, the total number of transaction points of this bank nationwide is 30.
But the most remarkable thing is that many foreign credit institutions do not hide their ambition to dominate the market, especially in the retail segmentthe long-term business that domestic banks still dominate thanks to advantage of “local knowledge”.
For example, Shinhan Bank Vietnam, with the spending of $151 million to buy Prudential Vietnam Finance Company (PVFC), this 100 percent foreign capital bank expressed its intention to take over consumer credit market share. Furthermore, Shinhan Bank set a target of being in the top three credit card business in the next three years. Woori Bank also wants to buy another retail bank to aim to become the leading foreign bank in Vietnam.
Statistics of the State Bank of Vietnam (SBV) also showed that the operation of foreign credit institutions has seen a breakthrough growth last year. Specifically, as of the end of November 2018, total assets of joint-venture banks and foreign banks increased by 18.34 percent to nearly 1.13 quadrillion dong. Meanwhile, the total assets of state-owned commercial banks only increased by 5.18 percent and that of commercial banks increased by 9.07 percent.
It is not difficult to recognise the reason that foreign credit institutions promote their operations in Vietnam, which are open business opportunities when Vietnam’s economy always has a much higher growth rate than those of other countries in the region with macroeconomic stability and low inflation. In addition, there are opportunities from new free trade agreements such as Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or The EU-Vietnam Free Trade Agreement (EVFTA) that Vietnam has signed or will soon sign. However, there is also another reason that foreign banks take advantage of domestic banks “busy” with restructuring and handling bad debts in order to promote activities and gain market share.
However, for any reason, the promotion of foreign activity also made the pressure of competition in the monetary market bigger and bigger. Undeniably, the presence of foreign banks will help individuals and businesses have access to many modern banking products and services, but that is a significant pressure to force domestic banks to improve competitiveness if they do not want to lose at home.