KB Financial eyes Vietnam expansion

By Kim Tong-hyung

HANOI ― Vietnam is helping inspire a lucrative outlook for KB Financial Group’s attempts to go global, according to a senior executive of the Korean banking giant. But the firm’s business strategies for the country appear to be more about picking its spots than charging head-on.

Korean financial companies have been collectively drooling over Vietnam’s underdeveloped but potentially immense financial market. Shinhan Financial, Korea’s third-largest banking group by asset, has been particularly aggressive as it expects to have nine branches by the end of the year operated by its two local business units ― Shinhan Vietnam Bank and Shinhan Vina Bank.

Shinhan’s business in Vietnam has relied heavily on corporate financing, but the company is now trying harder to strengthen its position in retail banking. The company is also preparing a credit card service, which could be launched as earlier as this month.

Compared to its up-and-running domestic rival, KB is a latecomer, having just opened its first branch in Ho Chi Minh City. However, KB Financial President Lim Young-rok claims that a sustainable business future in Vietnam will depend on making the right moves, which are not always dependent on speed.

Rather than approaching the Vietnamese market directly as Shinhan is doing, KB is taking the safe route, relying on its partnership with Japan’s Sumitomo Mitsui Banking Corporation, which is established firmly in Vietnam, to expand its business operations.

As in the case with other emerging Asian economies, Vietnam has been struggling to contain soaring inflation, which is feared to pose a serious threat to its financial stability.

During the Asian Development Bank (ADB) meetings here, Vietnam lowered its economic growth forecast for 2011 from a maximum 7.5 to 6.5 percent and lifted its inflation projection from 7 to 11.75 percent.

The recent difficulties, however, aren’t enough to dent the hopes for the country’s long-term growth, Lim said.

``The Vietnam market may suffer through temporary difficulties but there is no reason to doubt its upside potential,’’ Lim told Korean reporters on the sidelines of the ADB meetings.

For Korean financial companies, the attraction to Vietnam are the 2,000 Korean companies doing business in the country. However, expanding their coverage of Vietnamese companies and retail customers appear to be their ultimate test.

Increasing its local sales network will be crucial for growth in retail banking, Lim said. For the non-banking side of the business, KB will be looking for merger and acquisition (M&A) opportunities to secure growth, Lim said.

KB has been hiring regional experts and local residents to tailor its financial services for local customers, he said

When asked about its overall business plan for the company, Lim said that KB, Korea’s largest banking group by asset, expects around 2 trillion won (about $1.85 billion) in net income for 2011. KB’s net income in the first-quarter was measured at 750 billion won and the second-quarter numbers will be better due to the one-off profit from the sale of Hyundai Engineering and Construction, which had KB among its creditors.

``As a CEO, you have to let the numbers do the talking,’’ Lim said. ``Our eventual goal is to become one of the leading banks in the Asian region.’’