The development strategy of Vietnam’s banking industry to 2025, with a vision to 2030, has set a target of having one or two banks in the top 100 largest banks in the region in terms of total assets by 2020. This goal is considered as a challenge, if the big state-owned banks still face many difficulties in raising capital as at present.
A leader of the medium-sized commercial bank said that reaching the top 100 largest banks in the region was an overwhelming goal for us in the short term, even if reaching out to the regional playing field and the world is always the destination of all banks. “The realisation of the goal of one to two Vietnamese banks in Asia’s top 100 largest banks in terms of total assets by 2020 may have to rely on state-owned banks,” the leader said.
Indeed, not only leading the system of domestic banks in terms of asset size, but also the state-owned commercial banks own the assets which are two to three times larger than those in the largest private commercial banks. In particular, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) was the bank with the largest asset size in the banking system with total assets of up to 1.4 quadrillion dong at the end of June 2019. Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) was ranked second with assets of nearly 1.184 quadrillion dong; followed by Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) with total assets of 1.12 quadrillion dong. While the largest private commercial bank, Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank), had only nearly 440 trillion dong of assets by the end of June 2019, which was less than one-third of BIDV’s scale.
However, even with state-owned banks, the goal of reaching the top 100 largest banks in the region is not easy when the scale of their assets has not penetrated to the region.
Accordingly, Vietnam has only 14 banks in the list of the 500 largest banks in terms of asset size in 2018 (AB500 Rank) of Asian Banker. In particular, the largest bank in Vietnam is BIDV, which only stands at 147, though it has increased by 10 steps compared to 2017, while VietinBank is only at 162, Vietcombank is at 169. Even the largest private banks, Sacombank, is also at 353.
Returning to the story with the above banker, there is a remarkable detail that, according to him, reaching out to the international playing field does not depend on the size of the assets but mainly on the competitiveness. “There is no denying that large banks will have more advantages when it comes to the big playing field, but big does not mean strong,” he said.
The most vivid evidence for the statement of the bank leader above is the case of Vietcombank. Although ranked 169th in Asia’s Top 50 Largest Banks list in terms of total assets, Vietcombank is ranked 29th among the strongest banks in the region.
The ranking of the strongest banks is based on the expectation of long-term profitability from the core business of the banks, including indicators such as the size of total assets (17.5%), the rate of provision expenses over total bad debt (12.5%), bad debt ratio (12.5%), loan over deposit ratio (10%), and capital adequacy ratio (10%). Besides Vietcombank, there are two private commercial banks of Vietnam in the top 100 strongest banks in the region such as Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) at 76, Military Commercial Joint Stock Bank (MBMBBank) at 94, although these banks stay at 406th and 379th respectively in terms of asset scale.
Another evidence is that the wave of reaching out to the regional market of Vietnamese banks has been increasing in recent years and among them, there are quite a number of medium-sized private commercial banks. Beside big banks such as BIDV, VieinBank or Vietcombank, the list of private commercial banks in the region has been increasingly extended, including Sacombank, MB, SHB and HDBank.
Even according to experts, this trend will be even stronger in the near future with the support of technology. “The booming digital era can help banks provide cross-border services without having a presence in regional countries. And in this technology race, the faster the bank will win, not depending on the size,” a banking expert said and cited, some banks, in spite of small scale, has been recognised to meet Basel II standards.
