Korean banks face heated competition in Vietnam
By Lee Kyung-min
Leading Korean banks are increasing their efforts to expand in Vietnam, an untapped market rising rapidly as an alternative source of future growth amid the saturated domestic market.
The move from latecomers including Woori and KEB Hana is threatening the reign of Shinhan, which has been the leading foreign-invested bank in the Southeast Asian country.
Shinhan Bank Vietnam has over 4.9 trillion won ($4.2 billion) in assets, the largest amount held by a foreign bank, and runs 37 branches.
Woori Bank is seeking to challenge Shinhan's dominant position with its CEO vowing to make it the best foreign lender in Vietnam after opening its tenth branch there in Da Nang, Friday.
"We will increase investment and spare no efforts to make our Vietnam operation the best in the Southeast Asian country," Sohn Tae-seung said during a ceremony for the opening of the branch.
The lender plans to open three more by the end of 2019 and five by 2021.
Woori said the new branches will handle corporate and investment banking, and syndicated loans, a value addition to ongoing efforts to strengthen its retail business with local residents via timely updated mobile services including artificial intelligence-based credit checks and lending service.
The plan is part of a group-wide initiative spearheaded by CEO Sohn.
Woori Bank's assets in Vietnam stood at over $1 billion (1.28 trillion won) in June. Woori Bank Vietnam reported a net profit of 10.7 billion won in 2018 and 10.1 billion won for the first nine months of this year.
KEB Hana Bank, on the other hand, is opting for a strategic partnership with the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), a move less costly yet just as profitable given the largest lender in the Southeast Asian country has over 1,000 branches.
KEB Hana will hold a 15 percent stake in BIDV from Dec. 31, following a July 22 deal under which the Korean bank will buy 603 million shares in the Vietnamese lender for 1 trillion won.
The 15 percent stake could translate into a net profit of up to around 50 billion won, if the net profit of BIDV reaches the expected 400 billion won.
“The sheer net profit figure aside, BIDV's strong and comprehensive network will help us expand retail services with locals. This will diversify our business portfolio, leading to an increase in overseas profit,” a KEB Hana official said.
As other lenders begin seeking opportunities in Vietnam, Shinhan Bank Vietnam, which was started in 1997, has stepped up efforts to solidify its dominance.
In 2017, Shinhan acquired Australia's ANZ to strengthen its retail business for locals, and this year, it opened a private wealth management (PWM) center in Ho Chi Minh City in June.
Shinhan reported 93.4 billion won in profits in the January to September period. Net income was 96.6 billion won in 2018, nearly double the 47 billion won in 2017.
The bank said it would strive to stay the top player via strengthening its retail business, increasing the number of local corporate clients and by offering tailored asset management.
“We opened a private wealth management (PWM) center in Ho Chi Minh City in June to meet the needs of the growing number of high-end customers. We will continue to find joint business opportunities with fintechs there to improve customer convenience,” a Shinhan Bank official said.
A foreign business policy expert said Korean financial services firms should enhance risk management in a country where heated competition to expand their presence is not adequately followed by measures to protect against possible negative scenarios.
“The banks could see their profits decline if the financial authorities there imposes stricter rules on foreign players. Business plans should include ways to navigate through sudden, unforeseen events,” Korea Institute for International Economic Policy (KIEP) New Southern Policy Department Director General Jeong Young-sik said.