Commercial banks prowling Vietnamese retail business

The retail banking sector is set for intense competition as foreign and domestic banks are looking for a bigger slice of the pie

A vibrant market

On July 3, in Ho Chi Minh City, Vietnam International Bank (VIB) officially signed an agreement with Commonwealth Bank of Australia (CBA) to purchase all of CBA’s branch operations in the city.

Han Ngoc Vu, general director of VIB, expressed his appreciation for the strategic cooperation with CBA. Meanwhile, he wished to enhance the relationship with the strategic partner so that CBA Ho Chi Minh City’s strength could be promoted after the acquisition by VIB.

Also, he said that the retail banking is in the core of VIB’s business activities as it produced an annual growth rate of 25 per cent in 2016, 2-3 per cent higher than the growth rate of the whole banking industry in the same period. In the first six months of 2017, loan balance and deposits in the retail segment accounted for more than 50 per cent of the whole banking industry.

Another recent retail business acquisition in Vietnam involved ANZ Vietnam and Shinhan Vietnam. The former sold its retail business to the latter, a South Korean bank, and subject to regulatory approval, this deal is expected to be completed by the end of 2017.

Numerous foreign banks are now looking at the Vietnamese market, especially the retail sector. It is rumoured that two foreign banks are on the hunt for the retail units of other banks in Vietnam. Also, plenty of commercial banks in Vietnam are pushing up their retail businesses.

At present, there are nine fully foreign-owned banks in Vietnam, including Woori Bank, Public Bank Berhard, ANZ, Standard Chartered, Shinhan Bank, Hong Leong, CIMB, and HSBC. Recently, United Overseas Bank was approved to establish its fully foreign-owned subsidiary bank in Vietnam. Currently, there are more than 51 branches and 51 representative offices of foreign banks all over the country.

More intense competition of foreign and domestic commercial banks

With more than 93 million people, Vietnam is considered a potential market for the retail businesses of banks. This is the reason why commercial banks have recently been focusing on developing their retail businesses.

Of all foreign-owned banks, HSBC and Standard Chartered produced the strongest expansion in Vietnam. Leaders of Standard Chartered often commented that they were planning on raising human resources in the Vietnamese retail banking. HSBC is getting more aware of the domestic market and is growing strongly, especially in the retail sector. Currently, HSBC is in the lead in terms of revenue.

By acquiring ANZ Vietnam’s retail business, the South Korean Shinhan Bank expressed its ambition to dominate the retail sector. Last year, Shinhan Bank Vietnam generated a revenue of over VND1 trillion ($44 million), much higher than many domestic banks. Another South Korean bank Woori also scheduled to deploy plenty of retail banking services in 2017.

Domestic banks also place retail banking in their core strategies because it may bring enormous advantages in the upcoming time, while the room for developing the wholesale sector is getting tighter.

Even Vietnamese banking giants, such as Bank for Investment and Development of Vietnam (BIDV), Vietnam Bank for Industry and Trade (VietinBank), and Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), which used to mainly focus on wholesale, are now developing their retail businesses. Besides VIB, many domestic banks are looking to acquire smaller banks with an advantage in the retail business.

The retail sector is the development target of numerous international and domestic banks in Vietnam, thus, the competition is getting more intense.

The case of ANZ Vietnam demonstrates that the intense competition from domestic banks, such as Vietcombank, BIDV, and VietinBank, prevented ANZ Vietnam from seizing its desired market share in the retail sector, although it held high expectations due to the rising income of the Vietnamese populace.

ANZ Vietnam sells its retail arm to Shinhan Vietnam ANZ Vietnam will be offloading its retail banking arm to Shinhan Vietnam by the end of 2017, to focus primarily on its institutional banking in the country, ANZ Vietnam said in its latest press release.

Retail banking the key to competitiveness Banks are scaling up efforts to find suitable market segments for business promotion to boost efficiency.

Retail banking at the crossroads Dr. Andreas Stoffers, a German retail banker with considerable experience in Vietnam’s banking sector, analyses the challenges and prospects for undertaking retail banking in Vietnam.