Local banks to face competition from foreign rivals

European Union-Viet Nam Free Trade Agreement, Vietnamese market, EVFTA, Domestic banks, Top 10 most prestigious commercial banks in Viet Nam in 2020, Viet Nam Report, European Union-Viet Nam Free Trade Agreement, Vietnamese market, EVFTA, Domestic banks, Top 10 most prestigious commercial banks in Viet Nam in 2020, Viet Nam Report, Banking,
Transactions at Vietcombank. The bank takes the lead in Top 10 most prestigious commercial banks in Viet Nam in 2020. — Photo courtesy of Vietcombank

Domestic banks are expected to face increasing competition, especially as European banks will be able to access the Vietnamese market when the European Union-Viet Nam Free Trade Agreement (EVFTA) takes effect.

This information was released at the Top 10 most prestigious commercial banks in Viet Nam in 2020 by Viet Nam Report (VNR).

According to VNR, more than 96 per cent of surveyed experts and banks said one of their biggest challenges was the increasing trend of bad debts due to impacts of the COVID-19 pandemic after implementing debt restructuring, extending and freezing.

With loans that were ineligible for debt restructuring, banks must convert them into non-performing loans (NPLs) as prescribed, resulting in pressure of decreasing interest and provisioning, thereby reducing profits.

With debts that could be extended and restructured, these could be potential bad debts for commercial banks in the long term. If the health of the economy does not improve soon, banks would be at risk of losing capital.

According to calculations by the State Bank of Viet Nam, if the disease was controlled in the first quarter of this year, the NPL ratio of the on-balance sheet, debts sold to Viet Nam Asset Management Company (VAMC) and classified debt would be at 2.9-3.2 per cent by the end of the second quarter and 2.6-3 per cent at the end of the year.

The survey said although Vietnamese commercial joint stock banks have maintained their positions, the competitive pressure has been increasing as the country opens its market.

In addition, the emergence and development of financial technology companies (fintech) and technology giants (big tech) in providing financial services are putting pressure on banks. Banking business is forecast to be increasingly difficult if they do not quickly catch up with technology trends.

Although the banking industry has been at the forefront of applying information technology in operation and management, most banks have built a digital transformation strategy to increase customer experience, addressing the growing needs of customers. Most Vietnamese banking systems still operate traditionally with their transaction offices and mostly digitise internal processes.

The decision to invest in infrastructure of technology systems to meet changes in the current trend of shopping and consuming services has been a problem for bank leaders as this is a big investment while the effect is difficult to evaluate.

The survey said there are four biggest challenges in implementing digital banking include network security risks, lack of policies, overlapping priorities and lack of skilled labourers.

Nearly a half of experts and banks in the survey also said the decreasing credit demand has been one of the challenges for the sector.

Due to the impact of COVID-19, although Viet Nam has well controlled the pandemic, the world is still experiencing outbreaks, affecting the production and business situation of domestic enterprises. It was the reason that businesses still do not need to borrow new capital although lending interest rates have fallen sharply.

The pressure on capital raising on banks in 2020 is still relatively high, requiring them to have much higher equity capital than before to ensure effective risk management according to Basel II standards, especially banks with State capital. Profits of some banks declining in the context of increased risk of bad debt would significantly affect capital safety, increasing the pressure of raising chartered capital.

Vietnam Report said the key factors for the success of banks are human resources and technology. The digital revolution in the banking sector has required staff to regularly update information and develop creative policies. — VNS

Top 10 most prestigious commercial banks in Viet Nam in 2020:

Joint Stock Commercial Bank for Foreign Trade Viet Nam (Vietcombank)

Viet Nam Joint Stock Commercial Bank for Industry and Trade (Vietinbank)

Viet Nam Technological and Commercial Joint Stock Bank (Techcombank)

Bank for Investment and Development of Viet Nam (BIDV)

Viet Nam Prosperity Joint Stock Commercial Bank (VPBank)

Military Commercial Joint Stock Bank (MBBank)

Viet Nam Bank for Agriculture and Rural Development (Agribank)

Asia Commercial Joint Stock Bank (ACB)

Tien Phong Commercial Joint Stock Bank (TPBank)

HCM City Development Joint Stock Commercial Bank

 

News Related

OTHER NEWS

Three died in Hanoi truck collision

Three people were killed and one was injured when a car was crushed between two trucks in Hanoi on August 4. The scene of the accident The accident occurred at 3.15 am on... Read more »

Vietnam Covid-19 Updates (August 4): Ten fresh cases detected, latest treatment regimen announced

On the morning of August 4, the Ministry of Health announced 10 more cases of Covid-19, bringing the total number of people infected with this disease nationwide to 652 cases. Read more »

World breaking news today August 4: Trump asked 45 days for Microsoft to buy TikTok

World breaking news today August 4: Trump urges Microsoft to buy TikTok in its entirety. Meanwhile, Spain's former King Juan Carlos, under investigation for corruption, said he was quitting the country, Typhoon Hagupit in China and... Read more »

Footwear exports in seven months fails to break US$10 billion mark

The opening seven months of the year saw leather and footwear exports only reach turnover of US$9.53 billion, therefore dropping out of the list of top ten export items exceeding US$10 billion which... Read more »

Miserable grabbiker carried 8-month-old son along his work under baking heat of HCMC

Making both ends meet while the old mother still has to sell lottery tickets to earn their living, Mr. Hieu - a GrabBike driver - takes his infant son along with each ride... Read more »

Footwear exports over seven-month period fails to break US$10 billion mark

The opening seven months of the year saw leather and footwear exports only reach turnover of US$9.53 billion, therefore dropping out of the list of top ten export items exceeding US$10 billion which... Read more »

Over 70,600 Hanoians returnees from Da Nang test negative for COVID-19

Hanoi has managed to test 70,689 residents who recently returned from Da Nang by using quick testing methods and PCR diagnostics, with all the tests coming back negative, said Nguyen Khac Hien, director... Read more »

‘One-trillion-dong profit club’ led by Vinhomes JSC

The Vinhomes Ocean Park, a project developed by real estate firm Vinhomes JSC. — Photo vinhomes.vn Twenty-five companies have entered the “one-trillion-dong profit club” for January-June, despite the economy being ravaged by the... Read more »

One more Covid-19 patient dies in Vietnam

A 62-year-old woman with Covid-19 in Da Nang has been confirmed dead Tuesday, becoming the seventh fatality of the pandemic in Vietnam. Read more »

Flood maroons many places in Northern region, leaving two dead

Flood maroons many places in Northern region, leaving two dead Read more »