Malaysia’s second largest lender CIMB became the latest of a series of foreign banks expanding in Vietnam after the State Bank of Vietnam granted it a license to open a unit here on August 31.

CIMB Vietnam has the registered capital of more than VND3.2 trillion (nearly $144 million). 

With its Hanoi branch, CIMB will be the seventh foreign bank with a fully-owned operation in the country, joining compatriot Public Bank Bhd, HSBC, ANZ, Standard Chartered Bank, Shinhan Bank, and Hong Leong Bank.

Earlier this month, Woori Bank, South Korea’s largest bank in terms of consolidated assets as of the end of March, received approval in principle from the SBV on its plan to set up a wholly foreign-owned branch in Vietnam. 

Once it receives the licence to operate, Woori expects to help expand South Korean investments in Vietnam, besides offering services for Vietnamese retail customers.

On the other hand, a number of foreign banks have recently entered Vietnam by setting up branches. 

Last month, BNK Busan Bank launched a branch in Ho Chi Minh City, becoming the first Korean regional bank to operate in the south of Vietnam. 

Another South Korean bank, Nong Hyup, also made its way into the country by receiving in-principle approval for a branch in Hanoi.

Some banking experts remarked that there has been a shift in foreign investors’ taste from buying into Vietnamese banks to setting up new operations.

According to banking expert Nguyen Tri Hieu, the foreign operations and branches would primarily serve companies from the mother banks’ home countries and are not harbouring ambitions to attract Vietnamese customers.

“It seems the Vietnamese banking market is no longer as attractive to foreign investors,” Hieu said.

Back in the day, foreign banks were eager to buy into Vietnamese banks to leverage their domestic market share. 

But now, as Vietnamese companies are mostly of small and medium-sized, which are risky, foreign investors no longer care about expanding their Vietnamese customer base.

There are two other reasons for the switch in taste that arise from the several disadvantages that buying into a Vietnamese bank presents.

“Many Vietnamese banks do not document clearly their bad debts, so investors are not sure whether investing in them would be profitable,” Hieu explained.

Moreover, a foreign strategic investor can only own at most 20 per cent of a Vietnamese bank, and foreign investors can collectively own at most 30 per cent, which means they can only be financial investors without a say in management.