Korean banks race to expand in Vietnam

16-Nov-2019 Intellasia | Nhip cau Dau tu | 6:02 AM Print This Post

Korea’s leading banks are increasing their presence in Vietnam, an underserved market, but becoming an alternative source of future growth for them in the context of the domestic market saturates.

The move from latecomers like Woori bank and KEB Hana is threatening Shinhan’s leading positionthe largest foreign-invested bank in Vietnam.

Shinhan Bank Vietnam currently holds over 4.9 trillion won ($4.2 billion) in assets and operates 37 branches nationwide.

Woori Bank is seeking to challenge Shinhan Bank’s leading position. Speaking at the opening ceremony of the 10th branch in Da Nang on November 8, Sohn Tae-seung, CEO of Woori Bank, said that it would turn this bank into the best foreign bank in Vietnam.

“We will increase investment and efforts to make Woori Bank the best performing foreign bank in this Southeast Asian country,” said Sohn Tae-seung.

The bank plans to open three more branches by the end of 2019 and five branches by 2021.

Woori Bank said the new branches would operate wholesale banks, investment banks and syndicated loans, in order to diversify products, in addition to strengthening retail banking segment for local individual customers via mobile services, such as credit scoring based on artificial intelligence and loan services.

Woori Bank’s assets in Vietnam stood at 1.28 trillion won ($1 billion) in June. According to a Woori bank report, in 2018, the bank’s net profit reached 10.7 billion won. In the first nine months of this year, this figure reached 10.1 billion won.

Unlike Woori bank, KEB Hana Bank has signed a strategic cooperation agreement with Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV). According to the Korea Times, this strategy of KEB Hana is less expensive, considering the profitability of BIDV.

Accordingly, KEB Hana will buy 603 million shares of BIDV for one trillion won (20.3 trillion dong). After the deal, the Korean bank will hold a 15 percent stake in BIDV.

With this holding ratio, KEB Hana can earn a net profit of about 50 billion won, if BIDV’s net profit reaches 400 billion won as expected.

“In addition to net profit, BIDV’s extensive and comprehensive network will help us expand our retail services to local individual customers. This will help diversify our business portfolio and increase profits from overseas markets, “a KEB Hana official said.

In the context, other banks started looking for opportunities in Vietnam, Shinhan Bank Vietnam also tried to consolidate its position.

In 2017, Shinhan acquired Australia’s ANZ Bank to strengthen its retail business for locals. The bank opened a personal asset management centre (PWM) in HCM City in June 2019.

Shinhan said that in the first nine months, the bank achieved 93.4 billion won in profits. In 2018, Shinhan Bank’s net profit reached 96.6 billion won, compared to 47 billion won in 2017.

The bank said it would try to maintain its leading position through increasing retail sales, increasing the number of corporate customers and providing appropriate asset management services.

“We opened a personal asset management centre (PWM) in HCM City in June to meet the needs of our growing number of high-end customers. We will continue to look for business opportunities with fintechs to improve customer convenience,” a representative of Shinhan bank said.

A foreign policy expert said South Korean banks should strengthen risk management. While competing hard to expand coverage, these banks do not have solutions for possible negative scenarios.

“The profitability of banks may be reduced if Vietnam has stricter regulations on foreign banks. Banks need to have available scenarios for unexpected and unforeseen circumstances,” Young-sik, general director of Korea International Economic Policy (KIEP) said.

 

Category: Finance, Vietnam

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