Most of Vietnam’s domestic and foreign banks are sticking to their bullish development plans, despite the fact that the Communist Party-ruled government and the central bank are beginning to apply monetary and fiscal brakes to curb galloping inflation.
Standard Chartered Bank
“We see confidence among local corporations in their investment plans and very strong development in real estate, but the good thing is that we do not see a bubble or overleverage,” says Louis Taylor, CEO at Standard Chartered Bank Vietnam, Laos and Cambodia.
“Our Vietnam operations have started a new phase of growth with the injection of new capital to meet the VND3000bn [$143m] requirement,” says Mr Taylor, who adds that the workforce at Standard Chartered, one of five foreign banks with direct subsidiaries in Vietnam, has grown from 60 to more than 600 members of staff in five years.
Mr Taylor points out that Standard Chartered’s individual banking operations will focus on premium banking and solutions for people who require sophisticated financial services, such as investment and financial planning. “There are many people in Ho Chi Minh City and Hanoi who have more than $30,000 in annual income and want to invest wisely and plan for the future,” says Mr Taylor.
HSBC Bank
HSBC Bank (Vietnam) was incorporated as a subsidiary bank in January 2009. Since then it has expanded its network from two to 15 branches or sub-branches offering both retail and corporate banking services.
Tom Tobin, CEO at HSBC Bank (Vietnam), says his bank’s competitiveness lies in its international connectivity for foreign companies, with strong trade, payments, cash management and foreign exchange services. Mr Tobin says: “Now that we have a decent network, we can grow retail for customers who are more international in nature and aspire to international services and standards.” He adds that HSBC operates 150 ATMs, is linked with the ATM network of its strategic partner Techcombank, and is also the only bank to be linked with the massive ATM network of the Vietnam Post savings system.
HSBC launched its global wealth management services in Vietnam last year and, according to Mr Tobin, became “the first bank in Vietnam to launch a truly internationally connected wealth management system”. In March 2010, HSBC Vietnam also linked up with a major local insurance group, the Baoviet Insurance Corporation, to offer insurance products on the HSBC Bank website.
Mr Tobin says that Vietnam’s demographic structure offers considerable growth potential for its credit card service, which was launched in 2009, and its other personal and home loan products. “Some 60% of Vietnam’s nearly 90 million people are under 30 years old,” says Mr Tobin. “They are entering their most productive years – getting married, buying motorcycles and other consumer durables – and are looking for a bank to fulfil their needs.”
Citibank Vietnam
Another foreign bank, Citibank, is also upbeat about its prospects in the country. “Our underlying core businesses are very strong and transaction volumes in cash management, trade finance and foreign exchange were well into double digits,” says Brett Krause, managing director at Citibank Vietnam.
In addition, Mr Krause says Citibank is working with other financial institutions in Vietnam to "help expedite global trade, dollar clearing and payment flows” and is “the leading custodian for incoming institutional investment” into Vietnam’s stock and securities markets. Mr Krause adds: “We had a tremendous year in 2010 in our dominant franchise of corporate banking, with a number of impressive transactions.” The value of this part of its business totalled about $1.64bn.
Although the Hanoi government is planning to review fiscal spending to cool inflation and wasteful public spending, Mr Krause believes that most infrastructure projects in which the company is involved will continue to be backed by the government export agency, and that strong and well-designed projects will still find financing.
However, Mr Krause notes that there has been a lack of interest in the Hanoi and Ho Chi Minh City stock markets and in bonds among institutional investors due to concerns over foreign exchange liquidity, specifically the availability of US dollars. “Financial flows into Vietnam will likely be challenged until confidence in the dong is restored,” predicts Mr Krause.
ANZ bank
Thuy Dam, CEO of ANZ Greater Mekong Region, says the bank is aiming to become a super-regional bank instead of a global bank, and therefore will focus its effort on this region. For its part, ANZ is still keen to support the retail market, which it believes is still underserved, and is looking to shift focus on the corporate side to small and medium-sized enterprises (SMEs).
“There are a highly selective number of SMEs which we want to support, especially exporters,” says Ms Dam, who adds that while the bank will maintain a robust corporate portfolio, it was clear that large corporations will not be able to grow aggressively, as they all know they need to slow down in the new climate.
HD Bank
Several domestic banks report that they remain committed to ambitious expansion plans despite expectations that 2011 will be a complicated year. “We know 2011 will be a difficult year, but we are confident that some banks can become bigger and stronger if they take this opportunity to develop and do it right,” says HD Bank's deputy CEO Nguyen Manh Quan. “We aim to be [one of] the leading commercial banks, including state-owned banks, in terms of its business efficiency as well as local/international network coverage.”
Mr Quan believes that the drive by the State Bank of Vietnam to ramp up core capital requirements could open the door to consolidation in the country’s overbanked market. According to the State Bank of Vietnam, as of December 31, 2010, Vietnam had six state-owned credit institutions, 37 urban joint-stock commercial banks, 48 foreign bank branches, five joint-venture banks and five wholly owned foreign banks, as well as 48 representative offices. Mr Quan thinks that the sheer number of domestic financial institutions indicates that industry consolidation will happen. The only question is when.
“Many people thought that some mergers and acquisitions (M&As) could happen if some of the banks performed well [but] were unable to meet the December 2010 deadline for VND3000bn,” he says. “Some M&A may take place after the end of the new deadline at the end of this year.”
HD Bank is aiming to boost the number of its business units from 96 to 150 in 2011 under a strategy of controlled but aggressive expansion. Foreign banks remain HD’s biggest competitive threat due to the cheap funds available from their parents and global linkages.
However, Mr Quan is unphased. “Foreign banks can capture certain segments, such as affluent consumers wanting wealth management services,” he says. “But we can be closer to the market and use available and sufficient technology, human resources and appropriate pricing to tap the middle-class niche.”
Techcombank
Vietnam Technological and Commercial Joint Stock Bank (Techcombank) is among the top three private banks in Vietnam according to its CEO Nguyen Duc Vinh. His strategy is to grow the company to become the top bank in the next three to five years. Mr Vinh says Techcombank will achieve this by aggressively promoting banking services among Vietnam’s 300,000-plus SMEs and focusing its retail banking on affluent and high-income urban consumers in cooperation with its strategic partners, HSBC and McKinsey.
Techcombank plans to expand its current network of more than 300 branches and sub-branches in more than 40 of Vietnam’s 63 provinces and cities to between 550 and 600 by the end of 2014. It also wants to boost the ranks of its individual clients from 1.4 million to 5 million and from 45,000 SMEs to 100,000 during the same period.
Techcombank’s total Tier 1 assets reached the equivalent of $7.5bn in 2010 and it attained $100m net profits for the first time since its foundation 17 years ago. It aims to expand its asset base to $25bn by 2014 and expand its net earnings to $500m. “We are investing in our operational framework,” says Mr Vinh. “This includes our IT platform, quality management and risk management - and we are giving our staff the assistance of internationally recognised consultants in these areas.”
Techcombank has been engaging in a comprehensive 18-month transformation project since 2009. Mr Vinh says: “We need a revolution in how we approach the market and our operations. If we want to be the number one bank in five years, we cannot operate in the same way we did before.
“During the past two years, we have tripled the size of our workforce and entirely changed our previously decentralised structure,” adds Mr Vinh, who points out that Techcombank was one of the first in Vietnam to centralise credit approval and credit administration in Hanoi and Ho Chi Minh City.
However, Mr Vinh acknowledges that it will take three to six months to make sure that the economy is stable enough, and whether there can then be some other policy changes that will help the economy to grow. “Under these circumstances, we may have to slow down and restructure our income model and credit profile and put more investment in services, fee income and other areas,” he says.
SHB
Saigon-Hanoi Commercial Joint Stock Bank (SHB) international relations department manager Le Thi Yen believes that the coming year will see harsh competition between banks for deposits with interest rates of more than 14% and lending rates between 19% and 20%.
“We also anticipate further devaluations in the dong. This will impact the banking community and require more effective use of hedging instruments to protect exporters and importers from the price and currency risks,” says Ms Yen on behalf of the management of SHB, which won The Banker’s 2010 award for Best Bank in Vietnam.
During the past year, SHB issued VND1500bn-worth of shares to increase its charter capital to VND3500bn, and also issued VND1500bn in convertible bonds that will be turned into shares in April 2011. This will boost its charter capital to VND5000bn. With the rise in chartered capital, SHB has also improved its capital adequacy ratio to 13.8%, above the State Bank of Vietnam’s current 8% requirement. “We decided on the capital increase in excess of the State Bank of Vietnam’s requirements to fund our ambitious growth strategy,” says Ms Yen.
SHB is aiming to expand its network of 112 branches and transaction offices to 210 by the end of 2011, and its staff from 2048 in 2010 to nearly 3000. It also plans to boost resources for training. Ms Yen says the new climate offers many challenges, but also presents opportunities for banks to grow, especially given the increasing consumer purchasing power of Vietnam’s young and growing middle-income population.
Ms Yen adds that SHB will deploy a new IT platform in 2011 from which new services and banking products will be launched to target affluent and middle-income consumers. These will include home, car and motorcycle loan programmes, overdraft facilities and a personal finance advisory service.
Asia Commercial Bank
Asia Commercial Bank (ACB) executive vice-president Dam Van Tuan is adopting a more cautious stance. He notes that his own bank’s management differs on how to adjust to the new trend. He says ACB initially set very high targets for 2011 that were 1.5 times the average growth of the banking industry, 30% for the pace of loan expansion and 40% for the pace of growth in deposits.
However, the new regulations imposed by the State Bank of Vietnam mean that ACB is yet to announce its targets for pre-tax profits because the management needs to assess the impact of the changes. For example, the State Bank of Vietnam is aiming to cap loan growth at 20% – this will hold down deposit and lending rates, and thus interest spreads.
Indovina Bank
Indovina Bank president Jan Yei-fong says that his bank, a 50:50 joint venture with state-owned Vietnam Bank for Industry and Trade (Vietinbank) and Taiwan’s Cathay United Bank, is looking to expand. Indovina currently operates from 35 outlets, including nine full branches and 26 transaction offices, but it plans to expand this network to between 50 and 100 outlets.
Cathay United Bank purchased the shares of Indovina’s initial Indonesian partner in 2000 after the latter went bankrupt in the wake of the Asian currency crisis. “At that time, we wanted to set up our own branch, but it was easier to have our own joint-venture bank, which we have since expanded from four branches to 35 operational points,” says Mr Yei-fong.
In 2010, Indovina’s total loans rose 34% to $711m - more than 90% in corporate clients - while deposits grew by 40% to $600m and pre-tax profits climbed by 32%. Mr Yei-fong says more than 17.2% of Indovina’s loans were linked to syndications, including several projects in co-operation with Cathay United Bank’s Ho Chi Minh branch. He is confident that this network is large enough to bring the necessary benefits to the bank’s consumer finance and wealth management operations.
Mr Yei-fong believes the joint-venture has a competitive edge thanks to its experience in cross-selling financial and insurance products in Taiwan and other Asian markets with the Cathay Group’s life and property insurance units, both of which are now active in Vietnam. As a Taiwan-invested bank, Mr Yei-fong believes Indovina enjoys an advantage in serving the financial needs of Taiwan’s investors, but points out that Taiwan’s customers are very price-sensitive and competition among the eight Taiwan banks with branches in Vietnam is intense.
