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FOREIGN BANKS THRIVE IN VIETNAM

By Hoang Long

Foreign banks in Vietnam now count 30 branches and 47 representative offices. By the end of last year, these bank branches had a total balance of outstanding loans and invested capital of over US$3 billion. More importantly, several branches had a total outstanding loan balance of approximately US$600 million.
In 2005, the Hong Kong and Shanghai Banking Corporation (HSBC) opened a second branch in Hanoi with a prescribed capital of US$15 million. With US$30 million in total prescribed capital, HSBC is now the largest foreign owned bank in Vietnam.

Last year May Bank of Malaysia also inaugurated a second office in Vietnam, while the Cathay United Bank of Taiwan launched a new branch in the Chu Lai Open Economic Zone. Eight additional foreign banks opened representative offices in the country, while three others closed.

Additionally, a number of foreign banks bought shares of Vietnamese commercial banks in 2005, starting a new investment trend in large world banking corporations. ANZ, IFC of the World Bank, and Holding Financial Fund each bought 10 percent of Sacombank's shares. Several other foreign banks are looking to invest in further commercial joint stock banks. In so doing, they expect to take advantage of local banks regarding banking facilities and the customer network, in order to expand operations in Vietnam.

In addition, foreign financial companies are working on establishing 100 percent foreign owned capital companies in Vietnam that will finance operational leasing and consumer lending as well as provide card services.

By the close of last year, the total balance of outstanding loans from foreign bank branches increased almost 30 percent against 2004 and almost twice the overall growth of the banking system. Last year also saw the fastest annual growth in investment in the last 15 years.

Foreign bank branches also expanded their shares of the Vietnamese market and now account for over nine percent of the loan market. There are four joint venture banks with 13 branches in five Vietnamese provinces and cities. By the end of last year, these banks had a total balance of outstanding loans totaling over VND6 trillion and accounted for two percent of the Vietnamese banking market. Overdue debts made up only 0.25 percent of the total balance of their outstanding loans. Also by that time, non-banking credit institutions had a total balance of outstanding loans amounting to VND1.3 trillion, 13 percent more than at the end of 2004.

It is predicted that this year, foreign banks and international financial organizations will continue to increase investment in many economic areas in Vietnam, such as buying shares of commercial joint stock banks, opening branches and representative offices, establishing financial companies, diversifying modern banking services, increasing loans for various projects, consumer lending and technological renewal.

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