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Foreign banks forced to focus on wholesale, are now eying retail   2009-10-15 - LD

Foreign banks are expanding their network to try to penetrate Vietnamese markets.

 

 
In the latest report by the State Bank of Vietnam (SBV), Vietnam has 51 credit institutions, including five 100 percent foreign owned banks, 38 foreign bank branches, four finance companies and four finance leasing companies belonging to foreign banks.  In addition there are five joint venture banks with 19 branches.

 

The foreign-owned finance institutions are holding 10.9 percent of total assets and 11.8 percent of stockholder equity. The capital mobilized by the institutions accounts for 9.3 percent of total outstanding loans of the whole banking system and 34.5 percent of pretax profit of all commercial banks.

 

To date, wholesale remains the main business of foreign institutions, since foreign banks, due to the limitation on the number of retail branches they can set up, still cannot compete with domestic banks in retail banking. The main clients of the foreign banks are foreign invested projects and Vietnamese enterprises, which need capital in foreign currencies to import equipment and materials for domestic production.

 

With modern corporate governance technology, foreign banks are considered as having “high operation quality”. Their bad debt ratio is also at a comparatively low level. In 2008, the bad debt ratio of foreign banks was just 0.53 percent of total outstanding loans, while the ratio was 2.92 percent of the whole banking system.

 

Though foreign banks have been focusing on wholesale, they have also been paying attention to developing retail banking. The Hong Kong and Shanghai Banking Corporation (HSBC), Standard Chartered and then ANZ have announced retail banking services so far this year.

 

The current individual clients who use services of foreign banks are mostly those with high incomes. However, foreign bankers say that in the time to come, they will also target clients with medium income and small and medium businesses.

 

Foreign banks are not only trying to expand credit – they  have also been raising capital investment in Vietnam by making capital contributions to Vietnamese finance institutions.

  

HSBC now holds a 20 percent of stakes of Techcombank. Standard Chartered Bank has increased its ownership ratio in Asia Commercial Bank (ACB) from 8.84 percent to 15 percent.

 

May Bank purchased An Binh bank’s stakes in August. Also in the same month, French Societe Generale S.A purchased 15 percent of stakes of SeABank.

 

Meanwhile, ANZ group has become a big shareholder of the Saigon Securities Incorporated (SSI).

 

In related news, Citibank on October 13 became the first American financial institution to open a retail operation in Vietnam.  The branch in HCM City will provide deposit services to individual customers and remittance services



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