Foreign banks expand market share amid pandemic

15-Jan-2022 Intellasia | Thoi bao Ngan hang | 5:02 AM Print This Post

Despite the complicated developments of the Covid-19 epidemic, foreign banks in Vietnam have still recorded strong growth; expanded their coverage; increased investment cooperation, financing and linkage with domestic businesses.

Expanding operations

The State Bank of Vietnam (SBV) has recently licensed Shinhan Bank Vietnam to open Thong Nhat transaction office in Bien Hoa. Previously, Shinhan Bank Vietnam also put into operation a branch in Que Vo, Bac Ninh province. In the fourth quarter (Q4) alone, Shinhan Bank Vietnam opened six new branches and transaction offices.

Another foreign bank Public Bank Berhab also opened four new branches and transaction offices in Hanoi, Quang Nam and HCM City. The bank has also boosted the development in consumer lending and insurance distribution linkages. The expansion of foreign banks’ scale and operational coverage in areas with many industrial parks/ export processing zones the main activities of foreign direct investment (FDI) businesses to meet the demand for financial products and services of FDI businesses has become a tradition of foreign banks.

In the context of the Covid-19 pandemic, the fact that banks with direct foreign investments continue to expand their networks is a positive signal for the investment environment of Vietnam. The recent move of a Korean bank shows that it also has ambitions to enter the retail banking segment and value chain financing. For example, the credit products and services promoted by Shinhan Bank Vietnam in its new branches and transaction offices indicate that the bank has quickly promoted closed services such as withdrawals without the use of cards (Smart Withdraw) and convenient payment accounts S-Payroll. At the same time, the bank also promotes financing packages for supporting industrial businesses and FDI businesses with preferential interest rates.

The story of expanding the network and increasing financial products and services in the Vietnam’s market is not new. In the last two years, in turn, foreign banks such as UOB, HSBC, Standard Chartered, etc. all have made moves to develop their market share in the retail segments and supply chain financing. Accordingly, Standard Chartered Vietnam has launched a financial package worth one billion US dollars to for businesses in the plastic and import-export industries. HSBC has cooperated with Con Cung supermarket chain in 45 provinces and cities to finance the commercial field of mother and baby care products. Standard Chartered has financed Home Credit financial company to develop personal consumer loan segment.

Increasing competitive pressure

According to investors, after nearly two years being negatively affected by the Covid-19 epidemic, foreign banks have made many changes in expanding capital scale and increasing the presence of their products and services in domestic niche markets. Particularly, in Q3/2021, when HCM City implemented strict social distancing, statistics of the SBV HCM City branch pointed out that the credit of foreign banks in the area still recorded a high growth thanks to the continuous production and export activities of FDI customers.

Shinhan Bank Vietnam’s data also showed that after acquiring ANZ’s retail business, the bank has had a significant acceleration in the service business and consumer lending. Shinhan Bank’s products, in addition to attracting the traditional group of Korean-owned businesses investing in Vietnam, have recently attracted many Vietnamese customers in need of home loans and motorbike loans due to the flexibility of the loan products and the preferential interest rate calculation.

It can be seen that foreign banks, especially those that have been present in Vietnam for many years, not only have financial potential but are also very locally knowledgeable, which is in the past was the strength of domestic banks.

Specifically, banks like HSBC, Standard Chartered Vietnam, Public Bank, etc. all take financial fulcrum to compete in investing and expanding local customer base. In 2021, Standard Chartered Vietnam was approved by the SBV to increase its charter capital from 4.2 trillion dong to more than 6.9 trillion dong. Currently, the bank’s low-interest financing products for exporters and businesses in the fields of plastic and medical equipment of Standard Chartered Vietnam are favoured by many businesses in southern industrial parks export processing zones. Meanwhile, in 2021, UOB Vietnam also received approval of the SBV to increase charter capital from three trillion dong to five trillion dong. This Singaporean bank has cooperated with the Foreign Investment Department, helping attract about 25 trillion dong of FDI in the Vietnam’s market.

Similarly, despite the slight decline in income from services and customer loans in 2021, HSBC has launched many new products into the market such as domestic Letter of Credit (L/C) services on blockchain platform and attracted the participation of many large businesses. The bank has also supported general Atlantic and Dragoneer Group to lead a Series B funding round worth about 250 million US dollars of VNLIFE a technology start-up operating in the fields of developing banking solutions, digital payments, online tourism and retail segment.

Foreign banks often focus mainly on FDI customers and have recently developed the retail segment for Vietnamese customers. As foreign banks’ customers are mostly high-class customers who accept higher service fees than domestic banks, the competitive pressure on domestic banks is not great. However, once foreign banks plan to expand their areas and provide more products and services with “local knowledge”, the competitive pressure will increase for Vietnamese banks.

 

Category: Finance, Vietnam

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