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Bankers not shrinking from current difficulties   2008-07-02 - DTCK

Governor of the State Bank Nguyen Van Giau said that despite the difficulties in the finance market, no investor intends to withdraw an application for setting up a bank.

Giau said that 53 applications for setting up banks remain on the table, 23 of which were submitted by domestic investors, while the others by international finance institutions. He said that the State Bank has not received any proposal for merger and acquisition deals and the bank does not intend to ask banks to merge with one other.


The State Bank of Vietnam has just licenced Lien Viet and Tien Phong Banks.


Though banks are experiencing difficult days, and bank shares are falling down dramatically in the stock market, no investor has expressed an intention of giving up on a plan on banking on banks. In recent dialogues with the government, foreign investors urged the State Bank to licence foreign bank entities. The investors said that Vietnam committed to allow the establishment of foreign banks in Vietnam as of April 1, 2007.


Le Quoc An, Chairman of the Vietnam Textile and Garment Group (Vinatex), who is also awaiting a licence from the State Bank, said that Vinatex is still patiently pursuing a plan to set up a bank, in which Vinatex will contribute 10% of capital.


A member of the preparatory board for establishing a bank said that he is very busy with the preparatory works, especially preparations in human resources. He said that a very experienced general director of a joint stock bank has agreed to work as the general director of the bank in the future.


High inflation has been creating misfortune for banks. However, market survey institutions are still releasing reports which say that there are still a lot of opportunities available in the banking sector.


McKinsay said that the turnover of the retail banking sector in Vietnam may grow by 25% per annum in the next 5-10 years, the highest growth rate in Asia. Besides profit from credit, bankers can also expect high profit from services as Vietnamese people have got more familiar with bank services. Currently, only 8% of the population uses bank services, a relatively low level, which also means that bankers still can get pieces of the market cake.


It is true that the high inflation has been badly affecting banks’ operations; however, the difficulties banks are facing are not as big as people think.


In fact, many banks, including small ones, still announced satisfactory business results for the first five months of the year. Maritime Bank got VND175bil in pre-tax profit, PGBank VND74bil, while SeABank VND71bil. Meanwhile, foreign bank branches are still moving ahead with their plans to expand retail banking services in Vietnam.


Experts have expressed their concern over the establishment of too many banks in Vietnam recently.


Huynh The Du, Lecturer of Fulbright Economic Teaching Programme, thinks that management authorities should set higher requirements on new banks in order to limit the number of banks in Vietnam. For example, the central bank should require the chartered capital of VND5tril for new banks.


According to Du, South Korea, a $1,000bil economy, only has 13 banks. The US, which has the most banks in the world, has seen 7-8,000 banks dissolve or merge in the last 20 years.

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