Banking gets house in order

In light of the credit institution restructuring plan for 2011-2015  recently getting the government thumbs-up, state banks will continue to be the mainstay of the local banking system until 2015 and one to two state banks will rise to regional level in terms of scale, management, technology and competitive capacity.

The Bank for Investment and Development of Vietnam (BIDV) aimed to be named among the top 20 banks in South East Asia by 2020, according to bank chairman Tran Bac Ha.

An ACB representative said ACB was set to become one of Vietnam’s top five commercial banks by 2015 parallel to Agribank, BIDV, VietinBank and Vietcombank.

Industry experts forecast the race to gain the top player status in local banking market would be tough within the next few years.

“To have in place a sound banking system, each nation just needs from five or so strong banks as the mainstay of the economy. Vietnam’s banking market was so vibrant in the recent past since it houses a slew of small players with no bank staying as the mainstay,” said Ernst&Young’s Asia-Pacific Financial Services leader Keith Pogson.  

In fact, at least 14 credit institutions are in group I banks based on central bank’s recent 2012 credit growth indexes. Of them, BIDV, Vietcombank, Agribank and VietinBank are viewed as having the potential to lead the market. Foreign players as ANZ, HSBC and Standard Chartered Bank are also dubbed as bright candidates.

“The opportunity is equal to all players since the position as the top market leader was yet to be established,” said Pogson.

“Around 90 per cent of market share will still be held by local players at least until 2025. It is unlikely that overseas parent banks ramp up investment to hike capital and expand services to compete head-on with local players on the back of current global weakening economy,” said a Vietnam-based foreign bank top executive.

VietinBank, BIDV and VietcomBank are state banks which are forecast to rise to regional level, with greater assets, outstanding loans and deposits.

Industry experts, however, assumed there would be a long way for local banks, even best ones, to rise to regional leaders. By scale, a medium-size regional bank is valued at $50 billion in total asset value, while the asset value of Vietnam’s biggest bank currently Agribank is just $25 billion.

A State Bank executive said mergers, acquisitions and capital hikes could help state banks grow into regional players.