Along with expanding the network of ATMs in central HCM City, wholly foreign invested banks like ANZ and HSBC are gradually surpassing local lenders in terms of profit growth.
Last year, according to the statistics of SBV-HCM City arm, foreign banks in HCM City posted a profit growth of 168.3 percent from 2008's 1.311 trillion dong to 3.517 trillion dong. Meanwhile, profit growth of joint stock banks reached only 20.3 percent from 4.988 trillion dong to 5.999 trillion dong.
Joint stock banks were rushing to provide loans and raise the deposit rates and develop credit. Compared with late 2008, 2009's credit growth of joint stock banks jumped 59.9 percent, marking the highest level among banks. Foreign banks nearly stood still in credit segment, almost did not care the raising of outstanding loans, leading to the 2009 credit growth at -0.66 percent.
In a big foreign bank, 40 percent of profit structure comes from foreign exchange business and bonds, export import payment fees and 20 percent from other fees, 20 percent from providing consumer loans and the remainder is from other services. As for another foreign bank, the profit from foreign exchange business and funds also account for 40 percent of total figure.
Clearly, foreign exchange service and kinds of fees are major profit source of foreign banks. When local banks must comply with a series of administrative regulations relating to foreign currency business, foreign banks are very flexible.
In a long time they [foreign banks] sold and bought US dollar to enterprises through the third foreign banknote to reach a forex rate as expected. But after State Bank of Vietnam (SBV) banned the type of trading, they still used the third foreign currency via the third bank.
In addition, some foreign banks apply the flexible foreign exchange fees when enterprises transfer account overseas, open Letter of Credit (L/C) and credit guarantee. Especially, multinational companies will face more conveniences if banks offer kinds of these fees because they have to import equipments, materials and machines for carrying out projects in Vietnam. Usually, foreign banks prefer trading with their homeland's banks that have branches in Vietnam. For example, Korean companies want to trade credits with Korean banks in Vietnam. Domestic banks could not ape such an effective business method of foreign banks.
Under current laws, local lenders find it hard to earn profit from foreign exchange business. Once the price of US dollar for account transference or cash reaches ceiling rates, Vietnamese joint stock banks will have to introduce enterprises to each other for exchange negotiations. As a consequence, the turnover from foreign exchange business of many joint stock banks last year declined sharply. Even few had to suffer losses from the business segment.
When profit from services was low, joint stock banks were determined to boost lending. Statistics showed that lending service only provides 20 percent of profit structure of foreign banks but accounts for 75-80 percent of local banks' profit. The gap led to the difference in credit quality of both groups of banks. In 2009, the bad debt ratio of foreign banks in HCM City made up only 0.63 percent of total deposits but the ratio of Vietnam's joint stock banks was higher two times, at 1.39 percent. The ratio at state banks was up to 2.02 percent.
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