The capital market in 2018 witnessed a fairly strong development of foreign credit institutions (CIs) in Vietnam. The most notable case is United Overseas Bank (UOB) of Singapore upgrading its branch in Vietnam to a 100 percent foreign-owned subsidiary bank. With the presence of UOB Vietnam, there are nine 100 percent foreign-owned banks in the market, including HSBC (HongKong), ANZ (Australia), Standard Chartered, Shinhan Bank (Korea), Hong Leong Bank (Malaysia, member of Hong Leong (Malaysia)), CitiBank, CIMB (Malaysia), Public Bank Berhad (Malaysia) and UOB (Singapore).
The number of foreign bank branches has also increased with the participation of new faces, such as Kookmin Bank Hanoi branch with granted capital of 35 million US dollars. Meanwhile, many representative offices of foreign banks have also applied for extension of operation time.
Foreign financial institutions have also continuously expanded coverage in the Vietnamese market over the past year. For example, in the end of 2018, UOB Vietnam Limited Bank established another branch in Hanoi. Previously, a wholly foreign-owned bank Public Bank Vietnam opened three branches and two transaction offices, raising its trading network to 18 branches and transaction offices in major provinces and cities in Vietnam.
Not only increasing in number, the financial capacity of foreign CIs in Vietnam has also been enhanced. Accordingly, from the early months of 2018, a fairly large number of foreign bank branches have received more investment capital. For example, in May 2018, the State Bank of Vietnam (SBV) approved two foreign bank branches to raise capital, including NongHuyp Bank Hanoi branch (increasing capital from 35 million US dollars to 80 million US dollars) and Bank of China HCM City branch (increasing capital from 80 million US dollars to 100 million US dollars). Previously, in March 2018, Siam Bank HCM City branch also increased capital to 100.47 million US dollars.
Woori Bank Vietnam opened an addition of five branches and one transaction office, mainly in provinces with large industrial zones such as Thai Nguyen, Ha Nam and Binh Duong. Currently, Shinhan Bank is the wholly-owned foreign bank which has the largest network in Vietnam. With four new branches and one transaction office opened in two biggest cities in Vietnam in 2018, Shinhan Bank’s total number of transaction points is 30 units nationwide.
However, the most remarkable point is that many foreign CIs have expressed their ambition to dominate the market, particularly in retail segment the segment which domestic banks have owned many advantages for a long time thanks to the advantage of “local knowledge”.
For example, with the spending of 151 million US dollars to buy Prudential Finance Company (PVFC) in Vietnam, this 100 percent foreign-owned bank intends showed clear intention to dominate the consumer credit market. Not only that, Shinhan Bank also set a target of being in the top 3 CIs in credit card business in the next three years. Woori Bank also expects to buy another retail segment of another bank in order to become the leading foreign bank in Vietnam’s market, etc.
Statistics of the SBV also showed that the operation of foreign CIs attained breakthrough growth last year. Specifically, by the end of November 2018, the total assets of the group of foreign banks and joint venture banks increased by up to 18.34 percent to nearly 1,130 trillion dong; while the total assets of state-owned banks only rose by 5.18 percent and that of joint stock banks increased by 9.07%.
It is not difficult to find out the reason that foreign CIs promote their operations in Vietnam. That is the business opportunities when Vietnam’s economy always has a much higher growth rate than those of other countries in the region with stable macro-economy and low inflation.
In addition, there are also opportunities from the new generation free trade agreements such as CPTPP or EVFTA which Vietnam is going to sign soon. However, another reason is that foreign banks want to take the advantages when domestic banks are busy with restructuring and bad debt settlement in order to promote operation and gain market share.
Nevertheless, for any reason, the operation expansion of foreign CIs is increasing the pressure of competition in the capital market. Undeniably, the presence of foreign banks will help people and businesses have access to many modern banking products and services, but that is a significant pressure which forces domestic banks to improve competitiveness if they do not want to lose in their home field.
