The Key Is to Understand Your Balance Sheet and Your Customers’

We believe that China’s slowdown is not as dramatic as people fear.

 

Emerging Asian economies, especially Southeast Asia, are not really immune to the slowdown or the lack of growth in the US.

 

In some markets, you’ve actually seen a big drive of local consumers in the domestic markets like the Philippines and Indonesia.

 

So what this means for Vietnam? We don’t really look at short-term picture. I’ll look at the long-term trend of what’s happening in Vietnam. And we look Vietnam’s contribution to the global economy as a key part in the supply chain. This has increased at a remarkable rate. In areas such as agriculture – coffee and rice, more recently electronics, you’ve seen Vietnam’s contribution to the global supply chain has increased dramatically.

You’ve seen that sometimes it is through Vietnamese companies facilitating that growth or sometimes it’s through FDI [enterprises]. I think the next step, which I see is happening already, would be having more value-added processing happening onshore in Vietnam, rather than just exporting raw materials. So the keys are the export industry as well as management of the natural resources. And looking at the rather longer term, it would be the development of the local consumer market.

 

 

On the liquidity side, on attracting deposit, 12 months ago, the market situation was very different. A lot of banks used to borrow from other banks to fund their balance sheet. Whilst depending on the wholesale market for funding, for a small few balance sheets that are acceptable, becoming too dependent on it is a very high-risk strategy. So the result of measures taken by the State Bank, good measures, to try to reduce this dependency is banks are caused to try to attract deposit from commercial and retail customers.

 

Dr Vo Tri Thanh, Deputy Director of Central Institute of Economic Management (CIEM) Bad debt settlement programme is being considered by the Government and will be released soon. This is one of positive points of Vietnamese economy in the short term (from now to early 2013). Accordingly, treatments of ailing State-owned enterprises will also be clearer. This year’s credit growth target was set at 15 - 17 per cent at the start of the year but the actual growth was mere 3.3 per cent in the first 10 months because demand shrank, businesses were disqualified for borrowing capital. Besides, banks’ intrinsic problems as well as liquidity, despite being improved more or less, and growing bad debts also mattered. Bad debt settlement will be solved if a bad debt settlement institution is established. However, the most difficult problem is how to behave towards social pressures and how to explain to the people. In addition, which will be treated first and which will be handled latter is also of importance.

The credit picture was bleak in the first 10 months of this year. It portrayed what was happening in the market. Deposit interest rates at some banks are relatively high in comparison with the ceiling interest rate imposed by the State Bank, primarily because of different liquidity at different banks. Some banks fall short of capital to pass through the storm. There don’t have enough capital to overcome the storm, they, by one way or another, have to raise interest rates to get the capital they need

 

ANZ does not enter that interest rate race. ANZ's [deposit] interest rates are even lower than the ceiling interest rate. This is very beneficial to borrowers. Even at lower rates, ANZ can mobilise capital from customers because of its reputation, fine achievements during 177 years of operation, and its good credit rating (AA-/stable by S&P). Hence, customers trust ANZ.

 

I think on the banking sector, there is quite a lot of change happening, but I want to highlight that Vietnam isn’t alone in this kind of change that happens. Even among the foreign banks here, some of them event went bankrupt a few years ago and needed government’s support to stay alive.

 

And we’ve also seen some of the European banks that have actually withdrawn from Asia as the result of the challenges they have back at home. So I think it’s always reassuring to know that many countries face similar banking challenges; it’s not only Vietnam.

 

Fortunately, ANZ was not one of those banks that needed any of the government’s support during the recent banking crisis. And you can imagine over our 177 years, ANZ has navigated quite a lot of crisis. And I think even during my future career, at least there’ll be more 2 or 3 crisis to come.

 

I think the key to any bank withstanding any financial crisis is to have a very strong balance sheet and capital. Along with this financial strength are also risk management and processes that can stay close to its portfolio and monitor changes in the portfolio.

 

So it’s not only understanding the bank’s balance sheet, but also staying very close to our customers and their own businesses, and the trends that’ll affect their business, that’ll allow us to foresee any problem in the future.

 

We’ve got a very focused strategy. The three key areas that we want to be number one at in Vietnam would be transaction banking, foreign exchange and wealth management.

 

Transaction banking relates to both trade finance as well as cash management. In addition, we want to leverage our strength that we have in Vietnamese Dong bonds and US Dollar bonds, mortgages and credit cards.

What we have also as an advantage is that we have excellent connectivity across Asia, as well as to Australia and New Zealand. So we’ve actively attracted trade mission from overseas to come to Vietnam and we’ve also introduced Vietnamese companies to potential overseas markets.

 

* ANZ is voted the Best Credit and Interest Rates Services Provider in Vietnam - Asiamoney's 2012 Fixed Income Poll