United Overseas Bank has announced that it has an in-principle approval for a banking licence in Vietnam.
The foreign-owned subsidiary bank (FOSB) licence, issued by the State Bank of Vietnam, allows the bank to extend its branch network beyond Ho Chi Minh City and to offer its products and financial solutions to businesses and consumers located in other cities, potentially Hanoi.
A spokesperson did not rule out the possibility of having a private banking business in Vietnam, albeit in the longer term.
Foreign banks have found it hard to crack the Vietnamese market. To manage onshore money in Vietnam, foreign banks and wealth management firms have to open Vietnamese companies and cannot make sales through a representative office. ANZ and Commonwealth Bank recently sold their Vietnam retail operations to Shinhan Bank Vietnam and Vietnam International Bank, respectively.
‘For private banking, the old school private banking that I broke my bones with in England many beards ago is just not there as yet,’ said Paul McLardie, partner at Ho Chi Minh-based Total Wealth Management.
‘There is priority banking but not true private bank facilities with non-tied advice being able to be given. This will come through with the rise of technology, a generational change and increased trust in banks and primarily through the increase of bancassurance,’ he said.
Quantifying the high net worth market in Vietnam can be a task for two reasons – the definition is ever-changing in the developing market and there is still secrecy around actual income and assets.
According to the 2017 Knight Frank Wealth Report, Vietnam had 200 ultra-high net worth individuals in 2016; it forecasts the number to more than double in the next ten years. It defines UHNWIs as those with over $30 million excluding primary residence.
Domestic property and gold make up a large percentage of a Vietnamese high net worth individual’s investment portfolio and moving money for offshore investments is heavily restricted. Moreover, the Vietnamese dong is a non-transferable currency outside the country’s borders.
In addition, ‘Vietnam is still catching up to FATCA and international reporting so quite a few companies will not deal with either US citizens, nationals or even USD from Vietnam,’ said McLardie.
For now, UOB is focusing on crossing the regulatory hurdles in Vietnam to offer more products and services to customers and businesses.
‘With the FOSB licence, UOB will be able to support more Vietnamese companies in their domestic and regional growth by connecting them to cross-border opportunities throughout our extensive network,’ Wee Ee Cheong, deputy chairman and chief executive officer, UOB said in a release.
In April 2015, UOB and Vietnam’s Foreign Investment Agency signed a memorandum of understanding aimed at increasing foreign direct investments and trade between Vietnam and Southeast Asia. UOB also has an FDI advisory unit in Vietnam.