Retail banking the key to competitiveness

Figures show that banks have been facing a saturated wholesale market, while their retail market business has been increasingly vibrant with increasingly fierce competition.

According to State Bank of Vietnam Deputy Governor Nguyen Toan Thang, competition in the banking market, particularly in the retail segment, is fast rising. Therefore, banks need to diversify their business lines and product ranges to take advantage of new opportunities.

Supporting this idea, deputy chairman of LienVietPostBank Nguyen Duc Huong, said “Banks focusing on wholesale may die quickly, while retail banks can grow step-by-step in a sustainable manner.”

“Local banks should not sit idly by enjoying their home court advantages. They need to recognise retail banking as an important part of their growth strategy and take proper steps to attract customers and sharpen their competitiveness in the market,” said Tran Thanh Quang, deputy general director of private OceanBank.

He said this in the context that foreign banks, realising the potential of this segment in the Vietnamese market, are competing fiercely with local institutions to gain market share.

Though there is huge potential for the development of retail banks, to grab greater market positions banks need to expand services to their existing customers to maximise potential.

In reality, consumer lending is the most common product banks are offering now, particularly lending for car and house purchases.

Less common is lending for furniture and housewares, as well as to small and medium-sized enterprises.

Several banks have teamed up with financial firms to boost consumer lending.

Lending to agriculture and rural areas is also a priority of some banks. In this respect, state-owned Agribank and private LienVietPostBank are the leaders in tapping this segment.

“Our bank is pouring 40 per cent of capital into agriculture and rural areas. Our operations show that bad debts are rare in this field, while they are extremely high in urban areas,” said Huong from LienVietPostBank.

Thang from the central bank said that the fact that two thirds of the Vietnamese population lives in rural areas and most do not have bank accounts is a great challenge, but a bigger opportunity for local retail banks.