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Difficulties for local banks are opportunities for foreign banks 11th July 2008
The
assets and outstanding loans of foreign bank branches and joint venture
banks reached their highest levels in the first six months of 2008.
With global prestige and strong financial capability, foreign banks will
surely become redoubtable rivals of domestic banks in the near future.
While local banks are continuing to deal with a lot of difficulties
caused by the tightened monetary policies, foreign banks are making big
leaps to conquer the retail banking market. The difficulties for local
banks really are tremendous opportunities for foreign banks.
While domestic banks have been bogged down in real estate and securities
loans since 2007, foreign banks have avoided the troubles (they have
only used a part of their capital to purchase government bonds with the
risk of nearly 0%).
That explains why in the first half of 2008, while most domestic banks
had to struggle with difficulties in capital sources, interest rates and
bad debts, foreign banks with high liquidity and profuse capital
recorded high growth rates in many sectors.
By the end of June 2008, foreign bank branches and joint venture banks
had gained the growth rates of 33% for assets and 50% for liabilities
compared to the end of 2007, while the average growth rates of the whole
banking system were 8% and 20% respectively. Foreign bank branches and
joint venture banks now just account for 9.3% of total outstanding
loans, both in VND and US$, but account for 29.5% of total outstanding
loans in dollars of the whole banking system.
According to the State Bank Credit Information Centre, the operations of
foreign-invested banks in Vietnam are much better than domestic banks’
as their subprime outstanding loans are very low.
In the past, foreign-invested banks focused on providing services to
foreign direct investors (clients in their home countries which had
investment activities in Vietnam). However, there has been an obvious
change in the banks’ operations as they are now eyeing the domestic
retail market, hitherto dominated by domestic banks.
A lot of foreign-invested banks now have begun providing services for
small- and medium-size Vietnamese enterprises, giving credit to
Vietnamese households and private-run big companies. HSBC, ANZ and
Standard Chartered have been the pioneers in these business fields.
Previously, Vietnamese clients thought that they would not be able to
access foreign banks’ services because they thought that with global
brand names, foreign banks were only interested in big clients
(state-owned general corporations and 100% foreign-owned enterprises).
However, Vietnam is a potential retail banking market with 85mil people.
Foreign banks have been designing a lot of banking products suitable for
Vietnamese individuals and enterprises.
Foreign banks now have a lot of advantages to lure clients – Vietnamese
enterprises which have been making profit but cannot get credit from
local banks due to local banks’ policy on limiting credit.
In the first half of the year, most domestic banks postponed plans to
expand networks due to financial difficulties, while foreign banks tried
to enlarge their networks. Standard Chartered opened a branch and
launched retail banking services on July 1, 2008. ANZ plans to open four
more transaction offices by the end of the year, and some more branches
in Hanoi and HCM City thereafter.
With global prestige and strong financial capability, foreign banks will
surely become redoubtable rivals of domestic banks in the near future.
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