Foreign banks’ path to dominate domestic market

As of now, foreign banks do not have as large a network in Vietnam as domestic banks do. In order to increase coverage in Vietnam, many foreign banks want to establish 100 per cent foreign-owned subsidiaries.

Citibank, for example, is waiting for a letter of approval in principle from the State Bank of Vietnam. If granted, this is going to be the seventh 100 per cent foreign-owned bank in the country, besides HSBC, Standard Chartered, Hong Leong, ANZ, Shinhan, and Public Bank Berhad. Singaporean bank UOB has also requested permission to upgrade from a branch to a 100 per cent foreign-owned bank.

Huang Nam Chou, general director of Taiwanese bank E.SUN, the first branch of which opened in Dongnai province last September, said the Vietnamese market had much potential for financial and banking services and said that E.SUN was going to open a 100 per cent foreign-owned subsidiary in the country.

“The Vietnamese economy has been growing by an average 6 per cent per year in the past five years. Vietnam also signed many free trade agreements,” he explained, adding that Vietnam was important in E.SUN’s Asian strategy and in Vietnam they targeted not only Taiwanese companies but also Vietnamese and other foreign companies.

He also said the bank was going to make profit in its first year in Vietnam, and that E.SUN was going to expand to individual Vietnamese customers as well, not just companies. The reason was that following Vietnam’s rising income per capita, the demand for credit to buy houses and cars was going to rise too.

Foreign banks are attracting individual customers by offering attractive consumer credit packages and mortgages for homes, as well as mobile and internet banking services. With the modern technology already implemented in other countries, they are becoming more and more appealing to domestic customers.

Experts in the field said domestic banks should invest in technology to remain competitive. Le Thanh Trung, deputy director of HDBank, said domestic banks should learn governance from foreign banks.

Vietnam currently has about 100 branches and representative offices of foreign banks from South Korea, Japan, Singapore, and Thailand, countries that pour a large amount of foreign direct investment into Vietnam.