Vietnam - Foreign banks penetrating more deeply into domestic market

VietNamNet Bridge – Once the discriminatory treatments were removed, 100 percent foreign owned banks have been gearing up in their strategies to expand the market shares, pushing up retail banking services.

In the past, foreign banks were believed to target foreign clients, especially the multi-national groups headquartered in their home countries which have branches in Vietnam. However, nowadays, foreign banks not only serve foreign clients, but they have been trying to approach Vietnamese individual clients and businesses.

In the past, Vietnamese people, who wanted consumer loans, would contact domestic banks, because they believed that only Vietnamese banks could offer the reasonable lending interest rates, while foreign banks, which followed international standard in the governance, always charged high interest rates and service fees.

However, they have changed their mind when foreign banks have launched a lot of competitive credit packages to scramble for clients. Especially, the once unbelievable thing has happened: some foreign banks now offer the lending interest rates lower than that of domestic banks.

Hong Leong Bank, for example, now provides loans to fund house purchases at the interest rate of 0.88 percent per annum only for the first three months. The borrowers have to mortgage real estate products for the credit program which disburses from September 12 to December 11, 2012.

Meanwhile, the Hong Kong and Shanghai Banking Corporation (HSBC) now applies the interest rate of nine percent per annum for the first three months. At ANZ, those, who borrow money to buy houses, would have to pay 12 percent for the first month.

Meanwhile, domestic banks now lend at 15 percent on average to businesses, while the consumer loan interest rates are higher, about 17-19 percent, or even over 20 percent.

Analysts have said that foreign banks would be the redoubtable rivals to domestic banks in attracting Vietnamese clients with their “foreign banking technology and domestic service fees.”

Not only offering attractive interest rates, foreign banks also offer many other preferences to lure more Vietnamese clients. Andrew Liew, Managing Director of Hong Leong Bank, said the bank can provide the loans worth up to 70 percent of the values of the collaterals, while the duration of the loans could be up to 20 years.

Also according to the banker, Hong Leong Bank’s fourth branch would be set up in Binh Duong province, a new industrial production base in the south, which would become officially operational on September 26.

ANZ Vietnam CEO Tareq Muhmood, while affirming that Vietnam is a very important market in the global development strategy of ANZ banking group, said ANZ Vietnam has set up 10 branches nationwide so far.

Most recently, ANZ opened its representative office in Can Tho City in late August in an effort to approach the clients in the Mekong Delta, thus getting involved in the activities to fund import-export and trade affairs in the region.

HSBC has also said it is following a plan to increase its presence in the key economic zones where most of the trade transactions occur and the capital flow to. The bank also focuses on developing retail banking.

The foreign banks’ strategy to target Vietnamese clients and expand the market shares has brought initial achievements. Despite the global economic downturn and the challenging domestic market, HSBC still got the pretax profit of 1971 billion dong in 2011.

In related news, it is very likely that the government of Vietnam would allow big profitable joint ventures which commit to make long term business in Vietnam to mortgage land and the assets on the land at foreign banks for loans. If this comes true, this would give foreign banks more opportunities to obtain clients.

Compiled by C. V

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