Most Vietnamese bankers consider Japanese counterparts their major opponents, and  financial institutions from Europe second. This may stem from the fact that three Japanese banks have been present in Vietnam as strategic partners of the Vietnamese big banks.

However, Keith Pogson, a senior executive at Ernst & Young (EY) Asia Pacific, said at a ceremony introducing a banking operation survey held on August 13 that he disagrees with this notion.

He noted that while Vietnam has great potential in retail banking, this is not an advantage of Japanese banks. Therefore, Vietnamese banks should be aware of banks from the AEC, whose retail banking is also one of their strong points.

Many commercial banks from ASEAN countries are expected to join the Vietnamese market next year when the AEC goes into effect.

Experts from EY (formerly Ernst & Young) believe that the financial institutions from Thailand, Malaysia and Singapore would be the biggest threats to Vietnamese banks.

A survey by EY in Malaysia and Indonesia also found that two-thirds of the banks there said regional banks were their biggest rivals.

Nguyen Thuy Duong, EY Vietnam Finance & Banking Service deputy director, said the fiercest competition would be the one with ASEAN banks, which once experienced development periods like Vietnam’s.

Some analysts, however, noted that ASEAN banks will not come to Vietnam right after the AEC takes shape. Since Vietnam reportedly has commercial banks in excess, it would be nearly impossible for ASEAN banks to obtain “admission tickets” Vietnam right now.

However, the analysts believe that the banks would prepare financial capability and human resources to conquer the Vietnamese market later, possibly by 2020.

There is another possibility that ASEAN banks would join the Vietnamese market via merger and acquisition (M&A) deals, if they are interested in Vietnamese banks which are undergoing restructuring. This would be a good idea, because, as analysts said, despite current difficulties, the domestic finance and banking market still has great potential.

Pogson of EY said that foreign investors, when asked if they would sell the investment portfolios in Vietnam, said “no”. This is because they have high hopes about the market’s prospects.

The EY report shows that 94 percent of Vietnamese banks expect their business results to improve in the time to come. However, non-performing loans (NPL) remain their biggest worry, with 76 percent of the polled banks admitting that this is a serious problem which has been hindering credit access.

In related news, Masataka Yoshida, managing director of Recof, a Japanese consultancy firm, said at an M&A forum that Vietnam is the second-most attractive M&A market for Japan in Southeast Asia.