Foreign invested banks operating in Vietnam had a successful year in 2005, garnering huge profit margins while significantly increasing their market shares over 2004, said a report by the Vietnam News Agency.

The total assets of foreign invested credit institutions have reached nearly VND100 trillion (US$6.3 billion), a year-on-year increase of 25 percent, the agency said, quoting the State Bank of Vietnam (SBV).

The SBV also reported that the total pre-tax turnover of foreign invested and joint-venture bank branches increased by an average of 45 percent.

As for foreign bank branches, their total outstanding loans increased 30 percent by the end of 2005, twice as much as the total increase of the banking system, with total lending loans accounting for VND49 trillion ($3.1 billion), or 9 percent of the market shares.

These banks’ overdue debts accounted for only 0.06 percent of the market share.

Meanwhile, joint-venture banks’ outstanding loans sat at VND6 trillion by the end of last year, accounting for 2 percent of the market share. These banks’ profit margins climbed to VND200 billion, a 15 percent increase over the same period of 2004.

Last year, a number of foreign banks purchased shares in joint stock commercial banks, according to Kieu Huu Dung, director of the Bank and non-Bank Department under the SBV.

“Three foreign banks acquired stakes from three domestic joint stock commercial banks last year. Of this, the Australia and New Zealand Bank (ANZ) bought 10 percent of the Sacombank’s stakes, the Standard Chartered acquired 10 percent of the Asian Commercial Bank’s stakes and the Hong Kong and Shanghai Banking Corporation purchased 10 percent of Techcombank’s stocks,” Dung said.

Banking experts forecasted that this year, foreign banks and international finance organisations will continue to invest in numerous fields of the Vietnamese economy, primarily by acquiring commercial joint stock banks, opening branches or representative offices, setting up finance companies and diversifying modern banking services.

“The banking environment in the country will be more effervescent but challenging, as domestic banks will face difficulties and competition,” one industry expert said.

However, overseas banks have asked the SBV to loosen restrictions on opening new branches and the proportion of deposits mobilized on Vietnamese dong.

The SBV’s Deputy Governor Phung Khac Ke said the central bank is now debating whether to revise a decree orienting non-discrimination, thus fully implementing most favoured nation treatment principles, to satisfy the World Trade Organisation’s regulations.

“The decree will create more favourable conditions to help foreign banks operate more effectively,” Ke said. Until now, around 28 foreign banks’ branches, 4 joint-venture banks and 3 foreign invested leasing companies have been established in Vietnam.

Source: VNA