Vietnam private banking sector has been having the opportunity to encroach on market share, although some members have been in poor condition or have to restructure or are slowing down.
The State Bank of Vietnam just approved the plan to issue 10 trillion dong of bonds in 2019 to Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank). This new option was the plan of an equitised commercial bank, but the state still held the dominant ownership ratio.
About ten years ago, VietinBank was associated with the state-owned banking group, to distinguish it from those with dominant ownership structure of the private sector.
That name was also for grouping in the system, state-owned groups (including Vietnam Bank for Social PoliciesVBSP) and other groups of credit institutions (mainly private and foreign banks).
According to the above category, ten years ago, the state-owned banking sector dominated the market share in both traditional and core segments: mobilisation and lending.
After ten years, other credit institutions made a strong step forward to gain greater market share of deposits; mainly from the efforts of Vietnamese private banks.
As for loans, other credit institutions significantly increased their market share. However, the bigger piece still belonged to the state-owned bank.
The prospect is that the lending market share of other credit institutions may continue to increase and surpass state banks.
That prospect is tied to the present opportunity. VietinBank’s case represents the common difficulty of the state-owned banking sector today and in the near future: difficult to increase charter capital (the content has been analysed in the past).
Difficulty in raising capital, limited growth and loan size, requirements for balancing operational safety indicators make market share of state-owned bank loan limited.
In business, the difficulty of this company is opportunity for other businesses. However, capturing the opportunity depends on internal conditions.
Vietnam’s private banking sector experienced many ups and downs in the past decade. A series of members fell into a weak spot and had to restructure. Some big cases encountered difficulties after the merger, or the major shareholders were not united, leading to slow or unsteady steps.
However, the private banking sector continued to increase and encroach on market share.
At the current situation, with more favourable conditions on the model, more flexible in increasing charter capital without being bound by investment increase mechanism as state shareholders, Vietnam private banking sector could take the opportunity and continue to expand in those two major market shares.
This prospect is also noticeable, as many members of Vietnam’s private banking sector have been restructured positively, according to recent updates from SBV as well as their operational practices.
