Foreign Banks Hard to Acquire Market Share in Viet Nam

Sunday, April 20, 2008
The State Bank of Viet Nam, the central bank, has given and will grant licenses to foreign banks to set up 100% foreign-owned affiliates, but they will not find it easy to acquire market share, the New Hanoi newspaper reported.
Foreign banks now account for 3.3% of outstanding loans in Vietnam dong and 21.7% of loans in foreign currencies among credit institutions in Vietnam.
Despite quite high credit growth rates, foreign banks only focus on providing loans for foreign-invested companies and large-scaled domestic companies by financing imports and purchases of advanced technical equipments.
Vietnamese customers also complained that foreign players have not focused on retail banking services yet and they have not made any strong impressions. They have poor products with loans provided just for buyers of automobiles or houses.
Banking experts said foreign banks have not boosted retail banking services because of limit in raising Vietnam dong capital and asynchronous legal framework.

Before penetrating into Viet Nam’s retail banking market, foreigners will need time to study local business practices and consumer cultures.
The difficulties in convertibility of Viet Nam dong and interest rate liberalization also prevent foreign banks from taking advantages of their capital and technology, analysts said.
Foreign lenders will also face difficulties as domestic players are improving quality of operations, administration and expanding network under the pressure of the country’s WTO entry. Techcombank, ACB, Sacombank and VPBank have gained access to the advanced administrative technology for long time thanks to selling stake to foreign partners.
The State Bank of Vietnam has recently allowed HSBC and Standard Chartered banks to set up their wholly owned affiliates in Viet Nam.
Admitting difficulties in acquiring the market share in Viet Nam, HSBC still affirmed that the bank will is building new products and services in order to boost retail banking in Viet Nam, targeting consumer lending.
HSBC said it will not focus on competing in prices, but in services quality.
Standard Chartered also said it will expand to retail banking market. It plans to open 20-30 branches and install about 250 ATMs in coming time. (New Hanoi)