What are the big 4 Vietnamese banks?

Vietnam’s Big Four Banks: Profitable but Capital-Constrained

Vietnam’s banking sector has achieved remarkable growth in recent years, with the country’s commercial banks registering consistent billion-dollar profits. However, despite this success, these institutions face a significant challenge in expanding their capital, hindering their ability to keep pace with the expected growth trajectory.

The Big Four

Vietnam’s banking landscape is dominated by four major players, known as the “Big Four”:

• Vietcombank: The largest bank in Vietnam in terms of assets, deposits, and loans.
• VietinBank: The second-largest bank, known for its strong presence in retail banking.
• BIDV (Bank for Investment and Development of Vietnam): A state-owned bank that specializes in corporate lending and infrastructure financing.
• ACB (Asia Commercial Bank): A private bank that has grown rapidly in recent years, focusing on consumer banking.

Profitability and Capital

The Big Four banks have consistently reported high levels of profitability, driven by strong loan growth and a stable interest rate environment. However, their capital adequacy ratios, which measure the amount of capital they hold against their risk-weighted assets, remain below the international benchmark of 10%.

Factors Constraining Capital Expansion

There are several factors contributing to the capital constraints faced by Vietnamese banks:

• Limited Access to International Markets: Vietnamese banks have limited access to international bond markets, making it difficult for them to raise capital from foreign investors.
• Government Ownership: The government retains significant ownership in BIDV and VietinBank, which can hinder their ability to raise capital privately.
• High Non-Performing Loans: The banking sector has been plagued by high levels of non-performing loans, which can erode capital reserves.
• Regulatory Constraints: Government regulations have historically limited banks’ ability to issue new shares or increase their capital through other means.

Consequences of Capital Constraints

Capital constraints limit the capacity of Vietnamese banks to increase their lending and investment activities. This can have a negative impact on economic growth and the ability of businesses to access financing. Moreover, low capital adequacy ratios increase the risk of financial instability in the event of an economic downturn.

Addressing the Challenge

To address the capital constraints, the Vietnamese government and banking regulators have taken several steps:

• Encouraging banks to issue more Tier 2 capital, which is subordinated debt that can be counted towards capital ratios.
• Loosening regulations on issuance of new shares and other capital-raising instruments.
• Exploring joint ventures and partnerships with international banks to access foreign capital.

Conclusion

Vietnam’s Big Four banks have achieved significant profitability but face challenges in expanding their capital. Factors such as limited access to international markets, government ownership, and high non-performing loans have contributed to capital constraints. Address these challenges is crucial for the long-term health of the banking sector and the growth of the Vietnamese economy.