Foreign banks try new local tactics

The Year of the Rooster has been a rollercoaster ride for foreign banks in Vietnam: one received a licence to expand, two trimmed down their business scopes, while others decided to pest their stake in domestic banks. Despite the shifts in mission among these lenders, their long-term commitments remain unchanged, continuing their strategy of growing with the local economy.

ANZ’s signature blue trademark at its 14 Le Thai To branch in Hanoi has now been replaced with Shinhan’s logo Photo: Huy Pham

In September, Singapore’s United Overseas Bank was given full licence to operate as the ninth wholly foreign-owned bank in Vietnam, and is now able to cater to the financial needs of Singaporean investors in the country, as well as help boost economic trade between the two nations.

That could be the selling point of the Southeast Asian lender over the course of the year. For its Australian counterparts, such as Australia and New Zealand Bank (ANZ) or Commonwealth Bank of Australia (CBA), downsizing their business operations – namely the former’s retail arm and the latter’s Ho Chi Minh City branch – may not prove as easy as it sounds.

An insider account

2018 marks the 25th local anniversary of ANZ, which is based out of Melbourne. 2017, meanwhile, constituted a landmark year, as the lender recently completed the handover of its retail business in the country to Shinhan Bank, a subsidiary of the Seoul-headquartered Shinhan Financial Group. It has been merely a couple of weeks since the signature blue trademark at some ANZ outlets was replaced with Shinhan’s logo.

A business reshuffle now sees ANZ focusing primarily on institutional banking, yet Dennis Hussey, Greater Mekong region head and CEO of ANZ Vietnam, stressed in an interview in Ho Chi Minh City last month, “I’d like to reassure you that this doesn’t change our commitment to Vietnam. We remain focused as always in bringing innovations here, targeting multinational companies as well as major Vietnamese corporates and Vietnamese banks.”

Retail, as the CEO explained, has been an extremely profitable and high-growth business for ANZ in Vietnam, so parting with the arm will necessarily have an impact on the bank – but with confidence, that will be overcome. “The most important thing is that retail has been associated with the ANZ brand in Vietnam – so yes there are worries that we can be less visible after selling the retail business, but our focus right now is to serve our corporate clients and we’ll make sure we do that well,” Hussey said.

He added, “For Vietnamese corporates, we’d like to help major ones that are successful and want to invest overseas [with the laws they will encounter]. I’m excited about that. For the first time, we’re seeing significant outbound mergers and acquisitions (M&As) in Vietnam, and this trend will continue as Vietnam companies grow bigger and feel the need to expand overseas.”

Forecast for growth

The commitment that ANZ has for Vietnam may have arrived from the business prospects it sees here. For others, it boils down to the country’s impressive economic growth that promises a business for life.

A 145-year presence in the local market is definitely enough to prove the commitment of a foreign bank. For UK-backed HSBC, it may be the entry into a longer journey with the emerging economy. Pham Hong Hai, CEO of the bank’s Vietnam subsidiary, said in an interview with VIR that the lender has grown with the development of the country over the years, and will continue to contribute toward a stronger banking industry in the years to come.

HSBC’s commitment with Vietnam, according to Hai, stems from the openness of the country, the growth of its economy, and the stability of the political system. He said, “Its GDP growth has been one of the highest in the region, at 5-6.5 per cent a year. FDI investors have often viewed Vietnam as one of the preferred investment destinations, given its stable macro and political environment.

“Vietnam also has a high-potential retail market, valued at $158 billion in 2016, and a sizable domestic market with the country’s population ranking third in ASEAN and 13th in the world. Domestic demand has been resilient, especially for sophisticated products and services.”

For these reasons, Vietnam has been an important part of HSBC’s ASEAN business strategy and footprint, and the lender will keep strengthening its focus on growing the local franchise. “We continue the mission to be a bank of choice for foreign investors who want to build their business in Vietnam, and for Vietnamese corporates that want to expand internationally. Our vision is to become the best international bank in Vietnam,” Hai said.

If it is the market potential that keeps HSBC here, Standard Chartered Vietnam sees Vietnam as the market that offers the lender the opportunity to achieve its ambition – that of becoming an international network bank that ensures prosperity through persity.

CEO Nirukt Sapru of Standard Chartered Vietnam, ASEAN and South Asia Cluster Markets, said, “Standard Chartered Bank sees Vietnam as an exciting market for all business segments: corporate, retail, and SME clients. We are committed to continuing to serve Vietnamese people and companies by providing them access to world class financial services, including digital innovations that make banking more convenient and secure. We have been in Vietnam for over 110 years, and those deep local roots combined with our unparalleled international network puts us in a unique position to serve the needs of Vietnamese people and companies.”

“Our strategy is to continue to provide a superior product and a superior level of service to our clients in Vietnam, while using our international network to help Vietnamese connect with global markets and supply chains,” he added.

Strategy on the horizon

After over a decade of being strategic investors with Techcombank and Asia Commercial Bank, respectively, in 2017 HSBC Holdings Plc. pested 19.41 per cent of its holdings at the former, and Standard Chartered Plc. offloaded 15.69 per cent of the stakes it had with the latter. Such moves did raise some questions as to whether these UK banks are reformulating their missions.

Hai of HSBC noted that foreign banks may no longer pay attention to M&A or to becoming strategic partners of local banks, and rather focus more on self-development – or in this case, on their local units.

“We’ve seen a tendency of foreign lenders not spreading their investment on the horizon, but rather focusing on developing the markets in which they have the competitive advantage, and in those with scale and capability to generate growth in line with parent banks,” said Hai.

While foreign banks may no longer be interested in taking up stakes at local banks, foreign investment funds would likely invest in those with potential and healthy corporate management.

Meanwhile, as a new member of the pack of local firms, United Overseas Bank Vietnam has set its strategy on lending to small- and medium-sized enterprises (SMEs), as it has significant experience working with them in other markets.

Fred Lim, the Vietnam branch’s executive director and retail head, noted, “We know what it takes for small businesses to grow, and we’ll bring this expertise to Vietnam. We have a dedicated banking business service for SMEs.”