In a few next years, offshore banks will be authorised to establish and fully operate with their advanced banking products and services and modern technologies in the financial market of Vietnam will be a good condition to boost local banks to jump in the big competition for sustainable development. However, this will be a big challenge to local banks, said Do Ngoc Tat, board chair of the Bank for Agriculture and Rural Development of Vietnam.
In a recent interview, Do Ngoc Tat talked about the plans to face the foreseeable big competitions of local banks in general and Agribank in particular.
It is known that you are a representative of Agribank who has just attended a discussion on developing the world banking and finance field by the financing services group at the Asia-Europe Business Forum. What did the Agribank gained from this forum?
At the forum, the financing services group discussed many key measures with the aim to develop the capital markets, renew the business administration system of commercial financial institutions and banks.
Via the world financial crisis recently, it is proved that the banking and finance system always plays a very important role to the world economic development. To boost the sustainable economic development, it is essential to develop the local financial market, of which the monetary market and the capital market must be healthy. Banks and their business administration system must be good machines, devise and materialise good and effective policies, transparent, particularly their credit policies must be effective and be able to attract investment capital.
As the leading bank operating in the agricultural financial field, Agribank also is operates in many different fields. What financial achievements has the Agribank gained in recent years?
In 1991, Agribank took the lead in proposing and directly lending to farmers. In the first stage, only a few thousands of farmers were interested in borrowing loans from Agribank with total estimated outstanding loans of 300 billion dong. However, up to now, we have nearly nine million farmers that have borrowed from us. With the characteristics of a commercial bank focusing on raising deposits to lend to borrowers with the positive net interest rate (the differential between the deposit and lending interest rate is 0.4% a month) and we have a low non-performing loan rate.
At present, Agribank always holds the largest banking share in the agricultural financial field. Specially, total outstanding loans of the bank always ensure to meet 70% of the credit demand of this field of which 65% directly is lent to farmers and the remainder of 10% is disbursed to businesses.
At present, Agribank’s total outstanding loan balance is 140 trillion dong. Of the total, outstanding loans disbursed to farmers account for 95 trillion dong, the bank uses the remainder of 30% to lend to small and medium enterprises and state corporations to serve the agricultural development.
Regarding international payments, Agribank accounts for over 10% of international payment share in the whole banking system nationwide such as raising deposits, lending, guaranteeing, foreign currencies trading, international payments and cross-border payments.
The bank also has good cooperative commercial relations with 800 international banks through out the world. Particularly, in the cross-border payment, especially with China, Agribank accounts for 70% of market share in Vietnam.
Previously, earnings of Agribank only depended on credit sources but now, its credit revenue only accounts for 85% of total revenues, and the remaining 15% is from other services.
Our bank is determined to reach 20% of total revenues from other services in next years.
Concerning the implementation of the US-Vietnam Bilateral Trade Agreement (BTA), Afta and commitments to join the World Trade Organisation, from 2008 to 2010, foreign banks will have more operating scope in Vietnam. How will this impact the performance of Agribank?
The government guideline to allow foreign banks to fully operate in Vietnam surely will create a good playing field and opportunities for local banks to compete for future development.
It is sure that foreign banks will stand on a good position to attract more clients because their banking products and services and technologies are much more advanced than that of local banks. It is a fact that local banks in general and Agribank will inevitably face big competitive challenges. Therefore, Agribank must plan to issue many more effective measures in parallel with improving technologies and banking products and services so that it can compete with them. To reach the target, Agribank must further carry out the banking restructure scheme that has been passed by the government: reforming the business administration system, improving the financial services and boosting the market credit operation.