With trillions of dong of investment in foreign markets, business results of Vietnamese banks have been differentiated. Some banks lost hundreds of billions of dong each year.
According to the most recent business results report (2018), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) and Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)are Vietnamese banks operating the most significantly overseas.
Meanwhile, the bank with the largest loan size in Vietnam, Vietnam Bank for Agriculture and Rural Development (Agribank), has only about 812 billion dong of outstanding loans in foreign markets. This level of lending is equivalent to nearly 1/30 compared to the group of other Vietnamese banks of the same scale.
Report of business results in 2018 of Vietinbank Laos (Vietinbank owns 100 percent of capital) showed that after nearly seven years of launching in this market, the chartered capital of the bank has now reached about 1.17 trillion dong and total assets were about 8.4 trillion dong. In particular, the bank has disbursed more than 5.85 trillion dong, and the total mobilised capital reached about seven trillion dong.
Regarding the business results of the same year, Vietinbank Laos recorded 137 billion dong of pre-tax profit with Return on Equity (ROE) of about 7.29 percent, equivalent to the ROE of the parent bank in Vietnam (nearly eight percent).
Similarly, Vietcombank also has a subsidiary bank in Laos, but it was established in July 2018 with a charter capital of 1.82 trillion dong. In previous year, Vietcombank Lao mainly promoted its images and developed initial lending products.
Vietcombank also owns a financial company in Hong Kong, Vietnam Finance Company (VFC). The company’s activities include deposits, credit, payment services, money transfers as a miniature bank. In 2018, VFC earned nearly 20 billion dong of pre-tax profit.
Without disclosing the bank’s business results in Laos, however, Vietcombank said that the bank’s total operating income from overseas markets reached 89 billion dong last year. After deducting related expenses and making provisions for credit risks, the international market brought in nearly 22 billion dong of pre-tax profit.
As a result, Vietcombank Laos only contributed approximately two billion dong to the net profit of the bank last year. However, Vietcombank still expects this year the bank in Laos will collect about 40 billion dong of pre-tax profit. Particularly in the first quarter of the year, pre-tax profit from foreign markets brought about 15 billion dong to the bank, a strong increase over the same period.
Following in the oversea investment trend a bit late but Vietcombank is surpassing the remaining banks with the plan to open a representative office in New York (USA) in the third quarter of this year.
Accordingly, the bank was approved by the US Federal Reserve (Fed) and the New York Financial Management Authority (NDYFS) in principle to establish a representative office.
In the foreign markets, Saigon Hanoi Commercial Joint Stock Bank (SHB) is also a very strong investment bank, especially in Laos and Cambodia.
Thanks to the early “outbound”, SHB gained a large market share in credit activities in these two countries. During the previous year, the foreign market brought in 347 billion dong of income and 161 billion dong of pre-tax profit, accounting for nearly eight percent of the consolidated pre-tax profit. Only in the first quarter, the bank of Do Quang Hien also collected 81 billion dong of income and 48 billion dong of pre-tax profit from foreign markets. In previous years, foreign markets have brought SHB hundreds of billions of dong of revenue and profit each year.
However, not every Vietnamese bank going abroad also earns profits.
BIDV has a subsidiary bank operating in Laos, which is LaoVietnam Joint Venture Bank (LVB). This is the first Vietnamese bank established in Laos since 1999, owned by BIDV (65 percent of capital) in a joint venture with the Bank for Foreign Trade of Laos (BCEL).
In 2018, with charter capital of 100 million dong and total assets of approximately $1.13 billion (ranked third in the whole market), LVB belongs to a group of large commercial banks in scale and efficiency in Laos. Financial indicators such as capital mobilisation and loan balance reached over one billion US dollar and USD 809 million in the same year.
Owning a large credit scale helped LVB collect $9.5 million in profit before tax last year. The highest profit level among Vietnamese banks operating abroad.
However, BIDV’s general financial report showed that business results from foreign markets last year saw pre-tax losses of 93 billion dong. Even in the previous year, the bank lost more than 12 billion dong.
Also owning a subsidiary bank in Laos and Cambodia, Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) collected 296 billion dong in revenue from these two markets last year. However, the business results of the two “subsidiary banks” are contradictory. While Sacombank Laos saw a profit of 30 billion dong before tax in 2018, Sacombank Cambodia saw a loss of 325 billion dong. In total, the foreign market made Sacombank lost nearly 295 billion dong before tax.
The main reason for the loss of Sacombank Cambodia was the provision for credit risk provision of up to 335 billion dong, double the total revenue in this market.
Notably, the total credit balance of Sacombank Cambodia is only about 2.848 trillion dong, showing that the credit quality owned by Sacombank in Cambodia market is relatively low.
