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Banking & Finance

Factors at play

Released at: 08:40, 18/06/2017

Factors at play

Photo: Viet Tuan

Is ANZ Vietnam’s sale of its retail banking segment to Shinhan Bank Vietnam part of the bank’s new strategy or an indication of declining fortunes for foreign banks in the segment?

by Nguyen Quynh

When rumors began to swirl at the end of last year that ANZ would sell its retail banking operations in Vietnam, the bank dismissed such claims. At the end of April, however, the Melbourne-based lender officially announced an agreement to sell its retail arm to Shinhan Bank Vietnam for an undisclosed sum. It follows ANZ selling its retail and asset management operations in five Asian countries to Singapore’s DBS Bank last October. This latest sale raises questions about whether Vietnam’s retail banking sector still holds potential for foreign investors. 

Mutual benefits

Refuting any suspicions about ineffective business performance, ANZ has asserted that the sale of its retail business is in line with its strategy of simplifying the bank and improving capital efficiency. “Our retail business has been growing profitably and winning the trust of the Vietnamese market,” said Mr. Dennis Hussey, CEO of ANZ Vietnam. “In truth, the sale of the retail business reflects a much broader strategic review by the ANZ Group of our strategy globally. The group carried out a detailed strategic review of Asian retail and wealth and looked at options to simplify the bank and distribute capital more efficiently across the group.” 

While ANZ plans to focus its resources on its main business in Asia - institutional banking - where it is a Top 4 corporate bank supporting regional trade and capital flows, Shinhan Bank Vietnam aims to strongly develop its retail banking along with its stable corporate segment for sustainable growth. “By expanding retail banking, while focusing on corporate banking, Shinhan Bank Vietnam can reach a good balance between the corporate portfolio and the retail portfolio,” said Mr. Shin Dong Min, General Director of Shinhan Bank Vietnam. “The agreement on the sale between the two banks is expected to have a positive effect on Vietnam’s retail banking sector in particular and its economy in general.” 

It appears that the transaction is to the benefit of both sides as they have achieved their goals and selected the right partner. Shinhan Bank Vietnam fought off other financial institutions interested in agreeing to terms with ANZ. “ANZ ran a competitive process, where many banks expressed an interest in its retail business,” said Mr. Hussey. “We are delighted that Shinhan Bank, which is largest foreign-owned bank by branch numbers and the fastest-growing foreign bank in Vietnam in recent years, is taking over the retail business as a whole: staff, branches, transaction offices, and clients.” 

“Vietnam’s retail banking will develop strongly in the near future, especially with a helping hand from FinTech as well as the current economic recovery.”
Mr. Shin Dong Min, General Director of Shinhan Bank Vietnam

Each bank will have its own development strategy following the deal. According to Mr. Hussey, Vietnam leads the ASEAN region in attracting foreign direct investment (FDI), presenting the bank with a host of opportunities to provide quality banking services to companies entering the country and to Vietnamese companies heading abroad. “In short, we will build on our 24-year history in Vietnam and continue to bring innovative new financial products to the market,” he said. “The coming years will probably see many changes in society from digitization and new technology, and we intend to help our clients navigate these changes successfully.”

Shinhan Bank, meanwhile, will continue to focus on retail banking, as it has done over the last three years. The bank also aims to attract South Korean FDI companies in Vietnam as well as encourage South Korean enterprises to invest in Vietnam. It will place priority on loan products, internet banking, and credit cards. The sale agreement will become effective after gaining approval from the State Bank of Vietnam (SBV) and in the meantime the two banks will complete all necessary procedures surrounding the transaction.

Still attractive?

Though denying the sale was related to inefficient performance in retail banking, where it was named Best Foreign Retail Bank in Vietnam by International Finance magazine for four consecutive years, the sale of ANZ Vietnam’s retail arm has raised questions about whether the country’s retail banking sector still holds potential for foreign lenders. Foreign banks are thought to have been very successful in retail banking in the country, according to financial expert Nguyen Tri Hieu, but the sale perhaps shows the country is not the popular destination for foreign banks that was once thought. “Foreign banks are not really successful with retail banking in Vietnam,” Mr. Hieu believes. 

Twenty years ago, he went on, foreign banks were particularly eager to come to Vietnam. When they switched to retail banking, however, they encountered obstacles because the investment environment was also risky. By the end of 2016, Vietnam had eight 100 per cent foreign-owned banks: ANZ Vietnam, Hong Leong Vietnam, HSBC Vietnam, Shinhan Bank Vietnam, Standard Chartered Vietnam, Citibank Vietnam, Hong Leong Bank Vietnam, and Woori Bank Vietnam. In addition to these banks, as at December 31 there were 51 branches of foreign banks in the country, according to figures from the SBV. Of these, HSBC Vietnam, Shinhan Bank Vietnam, Standard Chartered Vietnam, and Citibank Vietnam are the big names involved in the retail banking market. 

The legal framework for banking operations in Vietnam, according to Mr. Hieu, remains incomplete and creates many difficulties for foreign banks. Domestic banks are still superior in retail banking because of their understanding of market demand. They have recently become increasingly active in the retail banking race, with strategies targeting 70 per cent of the adult population without a bank account and small and medium-sized enterprises with high capital demand, which account for 90 per cent of all enterprises in the country.

Mr. Hussey also said that local banks have invested significantly in their systems, products, and services, and several now offer excellent products. However, Vietnamese customers are quality conscious and demand extremely high levels of service. In this regard, he believes there are significant opportunities for growth in retail banking in Vietnam, and this growth will continue as the prosperity of the country drives demand for better quality financial services. 

While local banks have an advantage in extensive networks, foreign banks bring in sophisticated products and best practices in customer services tested in various markets, Mr. Sabbir Ahmed, Head of Retail Banking & Wealth Management at HSBC Vietnam, said. “Whether a bank is local or foreign, each has its own strengths, approaches, and range of products and services to ensure the needs of its target customers are met,” he explained. “So, opportunities are there for those who are able to understand and meet customer needs.” 

The withdrawal of ANZ from Vietnam’s retail banking segment shows that the country’s banking business is anything but easy. Overall, though, the market remains attractive to foreign investors. Retail banking has huge potential to thrive due to a host of advantages, according to Mr. Ahmed. The country continues to enjoy high economic growth, potentially 6.2 per cent for this year, as anticipated by HSBC. An increasing middle class is seeing rising incomes, and over half of the population are of working age. 

Vietnam is also a country open to technology development, with internet users accounting for half of its population last year; higher than in India, Indonesia, and Thailand. Forty-five per cent of the population owned smartphones and 85 per cent of internet users browsed the internet and shopped online on smartphones, according to eMarketer, 2016. All of these factors drive growth in consumption and the need for personal financial services. 

The fact that only one-third or so of the population have a bank account means there is still huge potential in the market, according to Mr. Ahmed. Furthermore, despite the impressive increase in the number of cards, non-cash payments still make up a small portion of total transactions. Cash withdrawals at ATM machines remain the most popular card transaction, while the number of credit cards account for a modest proportion of all cards, at approximately 3.53 per cent as at March 2016, according to figures from the SBV. This reality challenges the banks but also offers plenty of opportunities to cater to unmet needs.   

 “International financing and capital into Vietnam will also be of large importance. As Vietnam moves away from traditional ODA financing, managing external debt efficiently will be essential. I am very optimistic that the government is aware of these challenges and hope that the banking sector, both local and foreign, can help play a positive role in unlocking the huge remaining potential of Vietnam.”

Mr. Dennis Hussey, CEO of ANZ Vietnam


 “The industry is just at the start of its development, with current products and services offered to customers being less sophisticated compared to other markets. In the long run, driven by stable economic growth and the increase in the middle class, customer needs will soon be more diversified, ranging from basic banking products to wealth management solutions, and banks should study this trend right now to ensure competitiveness in the future.”

Mr. Sabbir Ahmed, Head of Retail Banking & Wealth Management, HSBC Vietnam

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