Asia Commercial Bank's assets will probably more than triple by 2015, making it the first non- government lender to overtake one of Vietnam's four biggest lenders, Chief Executive Ly Xuan Hai said.
Assets of Asia Commercial Bank, the nation's fifth-biggest bank, are expected to climb to VND900 trillion ($43 billion) by 2015 from about VND255 trillion currently, Hai said. Joint- Stock Commercial Bank for Foreign Trade of Vietnam, known as Vietcombank, is the country's fourth-largest lender with about VND344 trillion of assets at the end of June.
The growth of non-state-owned banks underscores the transition of Vietnam's economy over the past quarter-century from government controlled to market based. Since 2000, Vietnam has opened a stock exchange, concluded a trade agreement with the U.S., and joined the World Trade Organization.
"It's a long journey," Hai said in an interview in his Ho Chi Minh City office on Sept. 16. "From the time we were one-tenth the size of state-owned banks, now, step by step, we have narrowed the distance."
Asia Commercial -- in which Standard Chartered Plc (STAN) has a 15 percent stake -- has closed the gap already. Its assets were 68 percent of Vietcombank's at the end of June, up from 43 percent at the end of 2007.
Competition from "more aggressive and flexible" private lenders is taking business away from the top four state-owned banks, whose market share of loans and deposits in Vietnam has dropped to 56 percent now from 59 percent three years ago, Moody's Investors Service said this month.
"Confidence in the non-state-owned banks is much higher than before," said Hai. "This trend will continue."
Asia Commercial's financial health is "more robust" than those of its Vietnamese peers, Moody's said in a December 2010 note that put the bank's market share of overall system assets at 6.4 percent. The bank has a "disciplined credit approval and monitoring process, progressive risk management and controls, as well as the benefits of skills transfer from its shareholder, Standard Chartered," Moody's said.
The "sensitivity" of depositor confidence in the Vietnamese banking system creates liquidity management challenges and is an industry weakness, Moody's said in a separate report this month. Market confidence may also be undermined by asset quality problems and funding pressures at some of the nation's smaller banks, Moody's said.
"A few banks are in a very difficult situation," said Hai, without naming any. He said he doesn't foresee any bank failures, in part due to the lack of a "clear mechanism" for a definition of an industry bankruptcy.