Vietnamese banks are expanding their business to foreign markets, but not all banks can get big benefits.
In the recent meeting in Myanmar, Phan Duc Tu, Chair of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), said that by May 31, Yangon branch in the host country had total assets of over $130 million. Non-term deposits reached $46.5 million and the average debt balance was $20 million. Number of corporate customers increased by 27 percent compared to the end of 2018.
BIDV was a pioneering Vietnamese bank in the trend of joint venture, establishing subsidiary and representative office abroad. After BIDV, many big domestic banks also found their way to international businesses, mainly in Southeast Asia. In particular, Laos, Cambodia and Myanmar are the three most favoured markets, not only close to geography but also diplomatic and commercial relations with many cultural similarities. BIDV, Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank), Saigon Hanoi Commercial Joint Stock Bank (SHB), Military Commercial Joint Stock Bank (MBMBBank), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) and Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) are the leading banks in promoting international investment.
However, not all banks get a great return. The results of overseas branches and subsidiaries depend not only on their own ability but also on the business environment of the host country. Surveys showed that Vietnamese bank branches in Lao market continuously recorded profit growth. Meanwhile, in Cambodian market, the situation seemed to be less satisfactory, with banks having losses of hundreds of billion dong.
There were branches, subsidiary banks, and joint venture banks abroad with a large market share in the local market, ranked top in terms of scale and business efficiency. But there were also banks that sank into losses from year to year.
By the end of 2018, BIDV’s total assets abroad were 41.723 trillion dong, total liabilities abroad was 33.273 billion dong and losses were 93 billion dong. This result was quite surprising because many of BIDV’s foreign subsidiaries had a large market share in the host country.
In 2018, LaosVietnam Joint Venture Bank (LaoVietBank), where BIDV owns 65 percent, had total assets of $1.13 billion, ranked third in the market. Profit before tax reached $9.5 million (equivalent to 220 billion dong). The total staff of the whole system reached 398 people, the network had seven branches and 17 transaction offices.
Lao Viet Insurance Joint Venture Company (LVI), where BIDV owns 33.15 percent, is also one of insurance giants in Laos. By the end of 2018, LVI’s total assets reached $17.9 million. Premium revenue reached $13.3 million. Profit before tax reached $0.55 million, maintaining the second position in premium revenue on the Lao non-life insurance market.
Similarly, Sacombank also recorded huge losses in international markets, mainly in Cambodia. In 2018, Sacombank’s business in Cambodia suffered a loss of 324.5 billion dong; Previouslyin 2017, Sacombank also suffered a loss of 56 billion dong.
Meanwhile, some banks still had big profits from overseas markets. SHB recorded pre-tax profit in the foreign sector of 161 billion dong, contributing more than seven percent to the total profit before tax of the consolidated bank. This bank has two subsidiary banks in Laos and Cambodia. In 2018, SHB Lao’s pre-tax profit reached 27.6 billion kip, equivalent to 80 billion dong, up 61 percent. Meanwhile, SHB Cambodia, lower than 2017, also had a profit of $3.4 million, equivalent to 79 billion dong.
MBBank had 58 billion dong pre-tax profit from foreign activities. The bank currently has two branches in Laos and Cambodia and one representative office in Russia.
VietinBank has two branches in Germany, one subsidiary bank in Laos and one representative office in Myanmar. In 2018, VietinBank Lao had a total outstanding loan of over $249.26 million, an increase of nearly 22 percent compared to 2017. Profit before tax reached $5.87 million, fulfilling 104 percent of the plan with return on equity ratio was about 7.29 percent.
