Not only boosting the domination in the domestic market, Vietnam’s commercial banks are also building ambitious development plans to enter overseas markets.
However, Vietnam’s banks are just making initial steps such as opening branches and representative offices or establishing subsidiaries in foreign countries.
Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank-STB), after operating as a branch in Cambodia for a long time, decided to transfer the branch to be a subsidiary holding 100 percent stake held by Sacombank, with a chartered capital of $38 million.
Military Commercial Joint Stock Bank (MB) also inaugurated its branch in Phnom Penh, the capital of Cambodia, with a legal capital of $39 million in late 2011, marking Vietnam’s fourth bank investing in Cambodia, following Vietnam Bank for Agriculture and Rural Development (Agribank), Bank for Investment and Development of Vietnam (Bidv) and Sacombank.
MB believes that its Phnom Penh branch is an orientation for the bank’s business expansion strategy in the near future, after MB opened the first foreign branch in Laos in late 2010 with a capital of $12 million.
Saigon Hanoi Commercial Joint Stock Bank (SHB) has also officially opened its branch in Cambodia in the middle of February 2012, in the capital of Phnom Penh. SHB’s chair of director board, Do Quang Hien, said that SHB considers Cambodia the first foreign investment market in its long term investment strategy to become a modern retail bank in the country and region.
Meanwhile, Maritime Commercial Joint Stock Bank (Maritime Bank) is also in the process to finalise procedures to establish its 100 percent invested subsidiary bank in Cambodia and it is expected to officially put into operations in 2012.
Vietnam Commercial Joint Stock Bank of Industry and Trade (VietinBank-CTG) on April 9 also got the nod in principle from the State Bank of Vietnam (SBV) to set up an affiliate basing on the transfer its branch in Germany, with a total investment capital of up to 50 million euros. Of which, the initial chartered capital would be 25 million euros. VietinBank’s chair of director board, Pham Huy Hung, said that VietinBank is ready to provide useful products and services for Vietnamese community in Germany, individuals and German firms as well as give information about business opportunities in Vietnam.
According to leaders of lenders, the expansion of activities to the international market is to promote development plans and take the advantage of business opportunities. On the other hand, Vietnam’s banks have certain advantages, such as unlike Malaysia and Indonesia, Vietnam has actual conditions of very exciting marginal trade operations.
According to MB, with an investment capital of $12 million initially for its branch in Laos, but till the end of 2011 (after one year of operations), the branch gained profit of $500,000 and credit balance reached about $100 million. Thus, the opening of MB’s branch in Cambodia is also expected to achieve good results. Some businesses who are MB’s longstanding customers are operating very successfully in this market and many businesses and corporations of Vietnam are planning to invest in Cambodian market. In 2012, MB targets to achieve total outstanding loans of more than $200 million for its recently inaugurated branch in Cambodia.
For Sacombank, after over two years of operations under the branch method in this market, as of March 20, 2012, the bank has gained total deposits of $47 million, total outstanding loans at $60 million and pre tax profit at more than $2 million. The bank’s two-way money transfer turnover between Cambodia and Vietnam also reached the figure of $521 million. So far, Sacombank Cambodia has had four branches operating in Cambodian market and has ambition to expand the scale in the near future.
Bidv’s chair of director, Tran Bac Ha, said that Bidv is carrying out investments in some foreign countries such as Laos, Cambodia, Czech Republic and Burma. In the past years, Bidv’s operations in Laos, Cambodia and Czech Republic have gained high efficiency. Particularly, in Laos, Bidv’s investment activities have gained the return on equity (ROE) at 19 percent and ROE in Cambodia market was 2 percent and it was 8 percent as of the end of 2011.
Most banks when opening branches in foreign countries are oriented to customers who have relations with Vietnam. Of which, they are mostly Vietnamese enterprises doing business abroad and overseas Vietnamese customers. On the other hand, abroad investments are also the basis for Vietnamese banks to expand activities to attract capital in the more difficult context of domestic credit operations.
Vietnam’s trade demand with other countries in the world is very great. The more and more operation expansion of Vietnam’s banks in foreign countries together with the investment wave of Vietnamese firms overseas is considered positive. However, according to specialist in banking and finance sector, this does not mean that banks are only racing to get reputation but they should gradually build their trade mark in foreign markets to avoid the severe elimination rule.