A healthy financial sector is the lifeline for any economy that wants thrive. For a developing country such as Vietnam, it has taken years to restructure its underbanked economy and build a more efficient and sustainable financial system.
Despite noteworthy improvements on the local financial scene, many foreign banks have exited Vietnam in recent years for various reasons. But HSBC, one of the oldest foreign banks in the country with close to 150 years of operations, seems to be more optimistic and aggressive than ever.
"The clients that we choose to work with are growing very fast, both locals and foreigners," Pham Hong Hai, CEO of HSBC Bank (Vietnam) Ltd told Asia Focus recently.
"Our focus is to continue to grow in this market. If you look at the potential for Vietnam and Asean as a whole, the region is becoming more and more important."
HSBC Vietnam Ltd is 100% owned by The Hongkong and Shanghai Banking Corporation Ltd and is also the first wholly foreign-owned bank to operate both branches and transaction offices in Vietnam.
With 14 outlets and most activities located in Ho Chi Minh City and Hanoi, HSBC is currently the largest foreign bank in Vietnam by earnings, with a fiscal 2017 profit before tax of 2.23 trillion dong (US$95.6 million), followed by Shinhan Bank at 1.62 trillion dong and ANZ at 1.33 trillion.
“Our principle is that anything that can be serviced well by local banks, we shouldn’t do. We should focus on something that no other banks can provide, so we will remain relevant for our clients” — PHAM HONG HAI, CEO, HSBC Bank (Vietnam) Ltd
The top domestic banks in the country by pretax profit are Vietcombank (8 trillion dong), Vietinbank (5.2 trillion), Techcombank (5.2 trillion), BIDV (5 trillion), VPBank (4.37 trillion), MBBank (3.83 trillion) and ACB (3.15 trillion), according to market data from CafeF.
HSBC began shifting its strategy about five years ago to service only medium to large enterprises, exiting the smaller segments. Though the number of clients has been reduced, the strategy has proved to be more profitable, said Mr Hai, the first Vietnamese to head the bank in the country.
The key advantage for HSBC Vietnam is its ability to equally serve both local and foreign corporations by acting as an intermediary to facilitate the increased inflow of cross-border investments, he noted
"HSBC has a unique position in Vietnam market," he said. "We serve all the key segments, which allows us to add values to our clients.
"We can facilitate the matching of demands of foreign investors and local ones by helping them to find the right partners."
The bank's basic strategy, he said, is very straightforward: to ensure that HSBC will be the bank of choice for companies engaged in foreign direct investments (FDI). FDI has been the main driver of growth for the Vietnamese economy, with foreign-invested businesses accounting for about 70% of all export growth.
"Our principle is that anything that can be serviced well by local banks, we shouldn't do. We should focus on something that no other banks can provide, so we will remain relevant for our clients," said Mr Hai
Local businesses in Vietnam are also becoming more sophisticated and some are looking to go international, meaning HSBC can also capture this segment, he said.
In the past, he observed, the banking needs of local businesses were very simple as they only needed working capital. But Vietnamese companies today have become more sophisticated and require project financing at a scale and capacity that local banks may not be able to support.
"The scale of projects is very big and they need sophisticated financing solutions," he said. "We have larger capital financing and the ability to connect them with foreign investors."
HSBC Vietnam now controls an 8% market share for foreign exchange, 50% for securities services and has the highest single lending limit at US$60 million for one entity and $100 million for a group entity, compared with $5-7 million for rivals including Thai banks, Standard Chartered or Citi.
One of the opportunities HSBC Vietnam is pursuing is to increase deposits and loans as it currently has only a 3% share while the local market leader Vietcombank controls about 12-15%, said Mr Hai.
"We can still grow a lot more. In three to five years, HSBC Vietnam should be able to control 5-6% of the deposit and loan market. This will make us become a more meaningful player in the market."
In addition, in Vietnam today, a lot of state-owned companies are undergoing privatisation, meaning that they need to sell shares to strategic investors, which is where HSBC can also play a role.
"We can bring in the foreign investors to participate in those deals in the market," he pointed out.
Mr Hai also sees a diverse client base as a strength of HSBC. The second-most profitable foreign bank, Shinhan Bank, has been growing at a healthy pace but most of its clients are still Korean companies and it has few local customers, he said.
Similarly, most Citi clients are multinational corporations, while Standard Chartered clients serves mostly foreign companies and not many local ones, he said.
HSBC is the world's seventh-largest bank by assets. Its international network comprises 7,500 offices in over 80 countries and territories.
The bank's Asean markets -- Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam -- contributed 9% of global profit before tax, which totalled $10.7 billion in the first six months of 2018.