HSBC Bank (Vietnam) Ltd CEO Sumit Dutta is looking forward to helping HSBC develop its business model amid a challenging market which offers many opportunities.
What’s your attitude when you have just taken on your post as new regulatory movements appear in the banking industry, all tending to limit banking?
What you say seems not so encouraging for a new CEO, right? Yes, I have to confess that it’s all very challenging. But I like the thrill of being challenged.
There are a number of regulations which banks have to abide by - the key ones are the credit growth cap at 20 per cent, and non-manufacturing loans capped at 22 per cent of total outstanding loans by end June and 16 per cent by the end of December. Banks will have to manage within that band and be compliant. It seems kind of difficult for a bank with strong growth like HSBC. But if you really care for this country and looking at the bigger picture, then you will see the sensibility in all these things.
One of the issues being faced by Vietnam is there are many problems that have been existing without being solved for too long. But the most important thing here and also the most encouraging is Vietnam has a pro-growth government and also pro-stability government which sees that now it’s the time to take serious action. It is putting in the necessary brakes and safeguards to keep the economy stable and strong and moving in the right direction. HSBC is a long term player in this market. We have been here for more than 140 years and we have the long term interests of the Vietnamese economy as a key priority. We have experienced a rollercoaster of a ride over the previous years, but our faith and confidence in the future of Vietnam has not only remained steadfast, it has grown with every passing year. We need to be patient, help the government stabilise the market and help the Vietnamese economy improve and take its rightful place as a strong regional economic power.
What keeps you optimistic?
FinanceAsia has granted HSBC Vietnam, for the sixth year in a row, the award of Best Foreign Commercial Bank in Vietnam. What they most appreciate in HSBC is our attitude towards the country: “HSBC has faith in Vietnam” and “HSBC is there to help grow a nation”. I have the same faith and optimism.
The financial markets in Vietnam are young but there is huge potential - far more than in many other developed or emerging markets.
For a long time, Vietnam has been a cash-based country and now banking penetration is still low. Only an estimated 14-15 million people, or less than 20 per cent of the total population, have bank accounts. It is only natural that the cultural cash habits still exist. People have ATM cards but they prefer to withdraw money and pay cash when shopping or dining. And when it comes to choosing a bank, most customers are driven by price and interest rates.
But the beauty of a young market is you have an almost un-exploited land to discover. What you need to do is to educate your customers so that they are fully aware of their right to enjoy an international standard banking services and products, and to prove that you can bring the highest level of banking experience to them and help to not only make banking easy and convenient, but also to enable your customers become financially more effective. What inspires me is that Vietnamese are young, dynamic, educated and smart. They are open to new banking services, keen to experiment with new banking channels such as internet banking and mobile banking, and willing to try new products like debit and credit cards. Moreover, a very distinctive thing about Vietnam market is how quick the consumers move up the economic ladder. The percentage of economic middle and upper class is growing fast and the number of customers wanting more sophisticated products including wealth management products and services is increasing rapidly.
Vietnamese companies are fast, eager to adopt international best practices and ambitious. They are keen to engage in international trade, and happy to deal with buyers and suppliers from all over. HSBC has a vast international network and with our strength in global connectivity, we are able to meet the fast growing needs of the state-owned enterprises (SOEs), large local corporates and small-medium enterprises (SMEs).
All of this points to a very promising market for banks in the medium to long term.
You’ve just mentioned difficult market conditions. What, besides all the demographic features, but rather, in the economic environment itself drives that lessen your concern?
Vietnam is an emerging market and just like other emerging markets, its conditions are expected to be volatile. It’s the nature of the game. At this moment, inflation is under spot light and causes many challenges for SMEs and local companies to sustain their business profitably.
Many companies are hurting with the current high lending rates. Banks also face difficulties as the recent research- (Personal Finance Monitor of Nielsen Banks June 2011)- showed that daily expenses count for 50% of customer wallet leaving only 20% for savings and investment.
The strong measures of SBV to restrict credit growth in order to curb inflation is difficult for banks to follow. Yet, I think this is the right direction and i strongly support. We must endure a short-term pain for a long-term growth. CPI in June has been brought down to 1,09% which is the lowest CPI in the first six months this year and for the last nine months.
The depreciation of Vietnam Dong is also another key policy challenge. The government has taken some firm steps to improve the market confidence and stabilized the VND in recent months. That is a great step forward and if the Govt can continue with this strong dose of medicine then we can expect the macro economic indicators to improve, which in turn will help to generate a positive sentiment amongst domestic and foreign investors and revive FDI.
What is your assessment of the competition in banking market in Vietnam?
The financial market in Vietnam is still new and is poised to expand. At the moment, we have a large number of banking providers; i understand we have a total of than 100 banks in Vietnam. The picture is quite colourful now with the state-owned banks having great financial power, strong local distribution, excellent relationship with SOEs and therefore huge market share. Joint stock banks such as Techcombank, which is a strategic partner of HSBC, are aggressively expanding, improving their service quality, diversifying the products offered and gradually growing the market share and revenue. On the other hand, the number of foreign banks is also increasing, bringing in international standard products and services and strength of global brand names
Some of the newer joint stock banks are however lacking experience in banking and do not have the size and the skill to succeed in this market. The State Bank of Vietnam has accordingly put in minimum capital requirement for banks which will help to consolidate the banking industry. I think this is a sensible measure as it will avoid fragmentation of the market and ensure the banking industry is strong and well capitalized.
I believe banks which enter the market with a long term vision, truly differentiated product offering with value-added services are only going to facilitate the expansion of the marketplace.
How has HSBC adapted to operate in this market so far? How is the bank addressing the needs of local businesses and retail customers?
In 1870, we first entered this market with our core business of trade finance services. Till now we have come a long way and built a strong presence in this market. Our business scope has expanded significantly and we today provide a comprehensive range of services & products for both corporate and retail customers including SOEs, large Vietnamese corporates, multinationals, SMEs and personal banking customers.
We are now the largest foreign bank in Vietnam in term of network, product range, customer and staff base.We continue our role in being a bridge for Vietnamese enterprises who want to expand their business overseas and promote Vietnam as a promising destination to foreign investors. We stood by our customers through both good and difficult times. In early 2009, amidst the ongoing financial turbulence in the world market, we were the first foreign bank to operate a local entity in Vietnam -HSBC Bank (Vietnam) Ltd- in order to be able to reach closer to our customers.
Till now, after two years of local incorporation, we have expanded our physical reach and opened a total of 16 branches and transaction offices across the country including key economic hubs like Binh Duong, Da Nang, Can Tho and Dong Nai. Understanding the local market is still our number one priority, from which we strive to address the evolving needs of our customers. We are strongly promoting transactional banking to support corporate customers to smoothly conduct their business, we have built the best internet banking system and brought in pioneering and world class products to best serve our retail customers like HSBS Premier, HSBC credit card with chip technology etc.
This is a great market with amazing potential and we are very excited to be the leading international bank here.