As a number of foreign financial groups plan to penetrate deeper into the Vietnamese market by buying a larger stake in their partners, domestic banks are racing to find their own ways to prepare for the fight, industry insiders said.

Hong Kong Shanghai Banking Corp. (HSBC), which now holds a 20 percent stake in the Vietnam Technological and Commercial Bank (Techcombank), said it wishes to increase its holdings in the Bao Viet Group to 18 percent from the current 10 percent.

HSBC is pursuing its ambitious development plan in Vietnam by expanding its operations and increasing its share of the credit market after it was to establish a wholly foreign-invested bank in the country.

ANZ, one of the foreign owned banks that has been operating for years in Vietnam , is also working out a scheme to open six more transaction offices in Hanoi and Ho Chi Minh, following the inauguration of the first in the South Saigon Urban Centre and the introduction of various new products.

A number of commercial banks, such as Phuong Dong (OCB), Phuong Nam (SouthernBank), and An Binh (ABBank), said their foreign partners intend to negotiate with them to increase their stakes. For example, MayBank wants to up its share of ABBank from 15 percent to 20 percent.

While financial experts are worrying about the expansion of foreign banks-- with their obvious strengths in terms of capital, technology and human resources--domestic banks have remained calm in the face of battle.

Representatives from the Bank for Foreign Trade of Vietnam (Vietcombank) and the Bao Viet Commercial Joint Stock Bank (BaoVietBank) emphasised that local banks have the advantage in terms of existing networks and a thorough understanding of the market and clients.

Nguyen Quoc Hung, Deputy General Director of the Bank for Agriculture and Rural Development (Agribank), was even more confident, saying that the competition “is not very worrying” because foreign banks will “find it hard to build a network of operations and customers like Agribank.”

Hung stressed that foreign banks will not be able to reach out immediately to the agricultural and rural market - a key market for Agribank.

Sharing this view, leaders of the Global Petroleum Bank (GP Bank) and the Lien Viet Bank said there remained a lot of appropriate “vacancies” for local banks to tap.

However, many domestic banks have taken matters into their own hands in an effort to maintain their market share amid fierce competition.

Vietcombank’s Deputy General Director Dao Minh Tuan said, a few years ago, his bank started revamping its administrative structure, policies and operations to comply with international practices to help the bank make the best of all available resources.

The newly-established BaoVietBank focuses on technology development to create hi-end services and expand its transaction network. TienPhongBank, Techcombank and DongABank are the pioneers in offering mobile banking and internet banking services.

To be more cautious about the competition, Nguyen Minh Phong, an expert at the Hanoi Institute for Socio-economic Development Studies, said foreign banks have only made their first steps, and parent banks will stabilise operations and create momentum for their subsidiary banks in Vietnam to develop once the global financial crisis passes.

The “fight” between foreign-owned and local banks in Vietnam will actually commence as from the year-end, he stressed./.