In the continuous flows of Vietnam’s financial economy, in addition to financial intermediaries being domestic banks, the contribution of foreign banks is also counted. Banks with 100 percent foreign capital operating in Vietnam all come from big and reputable corporations.
There are currently nine banks with 100 percent foreign capital in Vietnam, including HSBC (UK), ANZ (Australia), Standard Chartered (UK), Shinhan Bank (South Korea), HongLeong Bank (Malaysia), Public Bank (Malaysia), Woori Bank (South Korea), CIMB Bank (Malaysia) and UOB (Singapore).
The latest data from the State Bank of Vietnam (SBV) show that by the end of April 2019, joint-venture banks and foreign banks recorded 1,124,962 billion dong in total assets; 177.037 trillion dong in equity; and 116.619 trillion dong in charter capital. Compared to the end of 2018, the growth of total assets fell by 1.03 percent, while that of equity and charter capital increased by respectively 8.7 percent and 2.76 percent.
The group of joint-venture banks and foreign banks is leading the market in terms of Capital Adequacy Ratio (CAR) with 25.9 percent, 2.5 times higher than the group of state-owned banks (9.61 percent) and also two times higher than the group of private joint stock banks (11.1 percent).
The SBV has not released the latest update on the performance of foreign credit institutions (CIs) but a statistic by the end of March 2018 showed that the Return on Asset (ROA) of this group reached 0.88 percent, higher than that of state-owned banks (0.52 percent) and of private joint stock banks (0.76 percent).
Meanwhile, the Return on Equity (ROE) of joint-venture banks and foreign banks was only 5.7 percent, much lower than state-owned banks’ with 10.21 percent and private joints stock banks’ with 9.88 percent. According to many experts, the low ROE of foreign banks is because their services have superior advantages and develop stronger than credit but the revenue from services is much less than revenue from credit.
However, comparing to the same period of 2017, the profitability ratios of joint-venture and foreign banks tended to increase slightly.
In terms of performance, while domestic banks have published their financial statements, foreign banks have been very tight-lipped and only annually reported to the regulatory body the SBV. Up to the beginning of October 2019, only HSBC and ANZ have announced their semi-annual financial statements, but only summarised reports without explanation.
With an increase of 4.78 percent over the same period of 2018, the total assets of HSBC Vietnam as of June 30th 2019 reached nearly 113 trillion dong, 4.3 times higher than ANZ’s (26 trillion dong). The charter capital of these two banks are kept stable at respectively 7.258 trillion and three trillion dong.
The pre-tax profit in the first half of 2019 of HSBC Vietnam reached more than 1.6 trillion dong, up by 13.07 percent compared to the same period of 2018. In particular, the main source of income came from credit activities. The income from interests contributed 68 percent of the total income from the bank’s business activities, and income from services accounted for about 20 percent. With this profit figure, HSBC has joined the trillion-dong profit club with profit being close to some domestic banks’ such as Tien Phong Commercial Joint Stock Bank (TPBank), Saigon Hanoi Commercial Joint Stock Bank (SHB) and Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank).
Similarly, ANZ also recorded effective performance in the first two quarters of 2019 with rapid rise in pre-tax profit, reaching about 181.4 billion dong, nearly 2.4 times higher than the same period of last year. The bank’s interest income accounted for more than 75 percent of the total income. Notably, ANZ continued to increase its CAR to a high level of 21.08 percent, while HSBC’s CAR is lower at 14 percent.
It can be seen that with a smaller network than domestic banks, foreign banks are still growing stronger and gradually asserting their position in the Vietnam’s financial market. The strengths of reputation, governance experience, financial scale and service quality of foreign banks will create significant pressure to domestic banks.
