The Vietnamese banking sector has consecutively seen foreign finance institutions to increase capital and provide new services, a move that paves pays the way for them to expand business operation and increase influence in the local market.
Shinhan Bank Vietnam has increased charter capital to US$245.4 million. Illustrative photo
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Together with the capital hike, foreign banks are also promoting their in-depth development in the Vietnamese market. Among them, Woori Bank Vietnam Limited late last month received approval from the central bank’s governor Le Minh Hung to add stock depository services to its business license.
Besides the capital increase, some foreign banks have also got the green light from the central bank to extend their operation licenses in Vietnam. Japan’s Sumitomo Mitsui Banking Corporation in Ho Chi Minh City got the SBV’s approval to extend their tenure for an additional 99 years on July 8.
But the most notable moves by foreign investors have been in retail banking, especially consumer finance, which was previously considered a point of strength for domestic credit institutions.
On July 2, Shinhan Card inaugurated its consumer finance company Shinhan Vietnam Finance Company in Ho Chi Minh City. As the leading multi-finance company of Korea, the Korean finance institutions plans to expand its product portfolio from the current credit loan-focused offerings to consumer durable loans, auto loans and credit cards by integrating various product know-hows.
Earlier, on June 25, LOTTECard also launched its subsidiary Lotte Finance Vietnam Co., Ltd, (Lotte Finance), marking its foray into the Vietnamese finance market after nearly six months of operations.
Kim Chang Kwon, chief executive officer (CEO) of LOTTECard, said he is optimistic about the growth prospects of Lotte Finance, adding that the company aims to become a leading consumer finance services provider, applying advanced technology to develop useful and convenient financial products as well as enhancing customers’ experience and satisfaction in the Vietnamese market.
Fierce competition
The number of foreign finance institutions is forecast to continue rising in the time to comenext time as many large foreign investors are still expressing their desire to take part in Vietnam’s market.
Bui Quang Tin, CEO of Bizlight Business School, believes there is a rising trend in foreign investment in the local finance and banking market, which has major potential with a population of nearly 100 million.
The expansion of foreign finance institutions in the country will increase the competitive pressure for local banks, experts said, suggesting that Vietnamese institutions needed to operate on a larger scale with huge investments in technology and products through consolidations and mergers to create stronger become stronger institutions that could and compete with foreign rivals.
By 2020, in accordance with commitments to the World Trade Organization, Vietnam will have to completely open the doors ofto its banking sector.
Vietnam currently has nine foreign-owned banks including ANZ, HSBC, Standard Chartered, Shinhan Bank, Hong Leong Bank, CIMB Bank, Public Bank Berhad, Wooribank and most recently UOB. In addition, there are about 50 foreign bank branches, more than 50 representative offices of foreign credit institutions and many 100 percent foreign-owned finance companies.
Besides doing business directly in the Vietnamese market, many foreign institutions also poured in local banks. It is expected that tens of trillions of VND will be invested in Vietnamese banks by foreign investors in 2019 and 2020 as negotiations on many M&A deals are running smoothly.
