IBK Bank has received approval to establish a 100% foreign-owned bank in Vietnam, marking a significant entry into the local market. This is the first time in nine years that the State Bank of Vietnam has authorized the establishment of a fully foreign-owned bank, as IBK joins Shinhan Bank and Woori Bank in a market where they have already established a presence.
According to local reports on August 19, IBK Vietnam is set to open on September 25, with a capital of 7.3 trillion dong (approximately 392 billion won), fully owned by IBK Bank. The bank received its establishment and operational license from the State Bank of Vietnam on March 24, and its headquarters will be located in the Landmark 72 building in Hanoi. Park Kyung-il will serve as the legal representative and CEO.
The approval for a 100% foreign-owned bank comes after the establishment of Public Bank and UOB in 2016-2017. With IBK Vietnam's launch, the number of fully foreign-owned banks in Vietnam will increase to ten, with South Korea holding three of them, alongside Malaysia, making it the country with the most in this sector.
However, the entry requirements are stringent. According to the revised Credit Institutions Law and related guidelines, foreign financial institutions must demonstrate five consecutive years of profitability and maintain total assets of at least $10 billion to establish a fully foreign-owned bank in Vietnam. They must also meet capital adequacy, risk management, and non-performing loan provisions.
The reopening of this avenue for South Korean state-owned banks is noteworthy, especially as IBK aims to focus on SME financing. Vietnam is emerging as a beneficiary of the global manufacturing supply chain reshuffle, leading to increased funding demands from SMEs. The presence of South Korean companies and their suppliers in Vietnam is further driving the financial needs of local SMEs.
However, obtaining a license is just the first step; establishing a foothold in the market presents its own challenges. Existing banks have already built their networks and customer bases, making it crucial for IBK to navigate its initial years effectively.
The market environment is also challenging. The performance of previously established South Korean banks has been mixed. Shinhan Vietnam reported total assets of approximately 237 trillion dong at the end of last year, a more than 22% increase from the previous year, with loans and customer deposits rising by 23.8% and 14%, respectively.
Despite this growth, profitability has declined. Pre-tax profit fell to 54.12 trillion dong, a decrease of 6.2%, while net profit dropped to 43.17 trillion dong. Improvements in non-interest income were not enough to offset declines in net interest income and service revenue.
Other foreign banks have faced similar challenges. HSBC Vietnam also reported a decline, with pre-tax profit of 41.415 trillion dong, down 6.9%, marking its lowest level in four years, while net profit fell by 6.8% to 33 trillion dong.
In contrast, Woori Bank Vietnam was one of the few foreign banks to increase profits, reporting a pre-tax profit of 15.1 trillion dong, a nearly 10% increase from the previous year, with operating profit rising by 18% and net profit reaching 12.05 trillion dong.
* This article has been translated by AI.
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