The year was 2008 when cheap credit and lax lending standards fuelled a housing bubble burst that sent ripples of ruin across the global economy. Market confidence and risk appetites worldwide collapsed but one wholesale distributor of chemical products from Singapore had just received its first overseas business licence in Vietnam and they were keen to expand.
Riverbank Group had been selling to Vietnam for several years by then and saw the potential of setting up an infrastructure hub in the country itself for ease of manufacturing, selling and exporting. But as the Global Financial Crisis was unfolding, they struggled to find a financial partner willing to help them actualise their ambitions.
All but one. United Overseas Bank (UOB), which had been their primary banking partner since the group was founded in 1984, stepped up when no one else wanted to. Together with International Enterprise Singapore (IE Singapore), a former iteration of today’s Enterprise Singapore, the group flew to Ho Chi Minh City and travelled two hours to the outskirts to survey the potential of a piece of barren land.
Riverbank Group first expanded to Vietnam in 2008 during the GFC with the help of UOB. Photo: UOB
“I remember there were no highways back then, so we had to take a car ferry that would bring us across the river to get to this land,” says Shen Jun Sheng, regional sales director of Riverbank. “They even took a boat with us to see the plot, understand the business and see how it was going to run in the future.”
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Subsequently, UOB approved a US$2 million term loan to the group. Although the sum was not considered big in terms of UOB’s exposure, Shen says the family business will never forget the help they got from UOB to scale in a country which did not have a good risk rating then.
“It meant a lot, especially when everyone else during 2008 was cutting down on investments,” says Shen. Today, Riverbank has over eight offices across six countries, with the ability to handle over 350,000 metric tonnes of total-handling volume and trades across 24 countries around the world.
The Riverbank narrative reverberated among enterprises across Asean looking to set up an overseas business unit in Vietnam in the early 2000s. It was common knowledge among these businessmen that UOB was a reliable and supportive partner in financing their expansion dreams, says Low Heng Huat, chairman of Falcon Incorporation, a Singaporean build-and-supply furniture company based in Hanoi.
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Low Heng Huat of Falcon Incorporation turned to UOB in 2018 after DBS slowed down its efforts in helping SMEs. Photo: UOB
Low too had turned to UOB in 2018 after his primary bank DBS Group Holdings slowed down its efforts in helping SMEs. Low remembers that as a period when other peers in the industry had been failing at their businesses and struggling with financing issues.
It was no coincidence that all these enterprise owners looked to UOB. The Singaporean bank first took a shot at regional expansion by entering the Vietnamese market three decades ago and over the years began making strategic business manoeuvres within the country based on the global political landscape.
When Vietnam opened up its market to the world in early-2010, the bank signed an MOU with the government and later launched its Foreign Direct Investment (FDI) Advisory Unit to attract businesses diversifying its supply chain away from the mainland amid US-China tensions. Later, it applied and was successfully awarded the foreign-owned subsidiary bank (FOSB) licence, allowing them to “do almost everything” within the country, according to Victor Ngo, CEO of UOB Vietnam. It is the first and only Singapore bank so far to be granted an FOSB licence in Vietnam.
All these were important signals to enterprises. “They’ve been doing this for many years and they are masters in helping others in this industry,” says Low, “They are willing to help with this and they are very flexible and easy and can help on all fronts [of the business].”
At present, Vietnam, in particular, is a strategic country for all businesses as geopolitical tensions between the East and West continue to play out. Ngo says the nation enjoys a stable political foundation, strong growth prospects, competitive production costs, a young and hard-working population, and comprehensive Free Trade Agreements (FTAs) as key advantages over other countries.
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These all contribute to favourable growth figures. Vietnam, which hit a decade-high FDI of US$27.2 billion ($36.2 billion) in 2022, has projected a three-year growth CAGR of 11%, according to the International Monetary Fund’s April data.
But despite laying all the right foundations over the last 30 years and growing more than three times y-o-y in FY2022, Vietnam only accounted for $17 million of UOB’s operating profit. This is extremely modest compared to Singapore’s $4 billion, Malaysia’s $744 million and Thailand’s $425 million contributions to operating profit.
In its latest move, the bank acquired Citigroup’s consumer banking franchise in Indonesia, Malaysia, Thailand and Vietnam last year. The legal completion of Malaysia and Thailand took place the same year and earlier this year in Vietnam. As operational day one (OD1) approaches for these three markets, costs are likely to fall. The Citi acquisition is likely to add $1 billion in income over the next 12 months when all four markets are integrated into UOB’s platform.
Last September, UOB had a “brand refresh” as a bank that is “Building the future of Asean: For the people and businesses within, and connecting with, Asean”. This gives UOB the “full suite” of services for banking in Vietnam, putting them at an advantage over its competitors who are only positioned to do wholesale banking at the moment.
Riverbank Group’s industrial park in Ho Chi Minh city exports chemical solvents to over 24 countries. Photo: UOB
Two engines running at full speed
At the UOB branch office in Ho Chi Minh City, Ngo told Singaporean media who were flown to Vietnam by the bank for its 30th-anniversary celebrations, that the acquisition of Citi’s retail segment allows them to run the business with “two engines”. UOB can now add unsecured products like credit cards and personal loans to its original car and mortgage loan products, which will give them access to the rising affluent class in Vietnam.
Ngo cites a McKinsey report, saying there will be 36 million so-called “rising affluent” Vietnamese by 2030 residing mainly in Ho Chi Minh City and Hanoi. As it stands, there are about 20 million Vietnamese who fall into this category, defined as having an annual income of US$10,000. UOB’s goal is to capture 10% of that.
Following the completion of Citi’s acquisition in March, Ngo shares that there was almost 100% uptake in customer integration with no significant attrition. The Citi workforce has also integrated with UOB, doubling the current staff size to 1,200. UOB’s focus will be to fully integrate Citi into UOB’s system, which Ngo anticipates will happen at the end of 2024 or early 2025. However, he remains cautious about sharing UOB’s short-term plans and goals following the acquisition, saying that it is “sensitive to give a number”. Retail banking is a volume game which will take time to build, Ngo explains.
Meanwhile, UOB’s wholesale banking business, which offers customers the full range of products from cash management to offshore and onshore loans, continues to run in tandem while the bank dedicates a portion of its efforts to retail. It aims for a 20% CAGR over the next three to five years, Ngo shares, giving the assurance that one segment of the business will not overtake the other in importance.
“The bank from day one has always taken a long-term view in most things that we do,” says Ngo, explaining the need for having both wholesale and retail banking services. This has allowed UOB to “stay diversified and ride through good and bad cycles”.
He adds that in banking, business cycles are unique so the group does not get carried away in the upcycle. “In banking, the risk begins when the deal is done,” adds Ngo.
At present, UOB faces competition from both international and domestic banks in fighting for both corporations and retail customers. In 2022, HSBC Vietnam was named the largest foreign bank in the country, with total assets of VND163.7 trillion ($9.2 billion) and charter capital above VND7.5 trillion. Rather than depending on its size in any individual country, UOB’s secret weapon is its network and connectivity.
The top 12 local banks in Vietnam accounted for more than 70% of total assets and 60% of deposits. With about 20% of the share going to smaller local banks, UOB is only left with 10% to capitalise. However, Ngo says that there is “plenty of room for everyone to grow”. His focus is not for UOB to be the bank of choice for the Vietnamese, instead, he stands by its competitive advantage of having a deep presence across the Asean region.
‘Why don’t we look at our own backyard?’
In 2022, Vietnam attracted around US$22.4 billion in FDI projects, according to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI) of Vietnam. They forecast that Vietnam will likely attract US$36–US$38 billion this year.
Singapore is the second overall largest investing partner in Vietnam, and accounts for the second highest amount of newly registered capital in 2022. Photo: Vietnam Foreign Investment Agency
As it stands, Singapore last year accounted for the second-highest amount of newly registered capital of over US$2 billion, which is just behind Japan and ahead of China. The city-state remains the overall second-largest investing partner with over 3,273 registered projects and over US$73 billion worth of registered capital, just behind South Korea.
With the FOSB licence, UOB has positioned itself well to capture a chunk of the capital and potential Vietnam has to offer, by expanding branches and moving beyond wholesale banking into the SME and retail sectors. In 2015, UOB signed an MOU with the Vietnamese FIA to increase FDI trade between Vietnam and Southeast Asia, marking the FIA’s first such collaboration with a bank. Since then, it has generated $5.7 billion, facilitated the start of 250 businesses and seen the creation of 33,000 jobs.
Describing the bank as a “one-stop shop” for businesses, Ngo explains that starting a business in Vietnam may present challenges such as complex ministerial procedures, legal frameworks and shoddy infrastructure. Because UOB has had more than a decade of presence in the market, Ngo says it has the ability to connect businesses with all the right partners, as well as provide strategic advice and banking services.
With 10 FDI centres across the region, businesses can tap into UOB’s network of existing relationships in Malaysia, Thailand, Indonesia and more.
“Imagine if you were a large corporation or a big SME looking for a supplier or distributor. Instead of doing the ground research yourself, we have the numbers and analytics of these businesses in Vietnam that already bank with us,” says Ngo. Citing a client who had come in from China looking to do business in Vietnam, Ngo says that they were also able to tap into their supply chain of businesses across Southeast Asia and link them up with suppliers in Indonesia and Thailand.
On July 7, Singapore hosted its seventh edition of the Singapore Regional Business Forum (SRBF) in Hanoi — the first to be held overseas — as a move to further strengthen economic ties between the two nations. The forum marks 50 years of bilateral relationships and 10 years of strategic partnership, and saw the signing of 12 MOUs between public and private sector companies from both countries. It was attended by the Deputy Prime Minister of Vietnam Lê Minh Khái and Singapore’s Minister for Manpower & Second Minister for Trade and Industry Dr Tan See Leng.
Singapore and Vietnam further enhanced their economic collaboration with the signing of 12 memoranda of understanding (MOUs) between public and private sector companies from both countries. Photo: Singapore Business Federation
With over 500 participants across 150 companies, the atmosphere in the crowded ballroom of Melia Hotel in Hanoi seemed to suggest an unspoken confidence in Vietnam’s future.
“Vietnam remains a ‘bright spot’ in many of their businesses,” says Kok Ping Soon, the chief executive officer of the Singapore Business Federation (SBF), which organised the SRBF. It is precisely because of the geopolitical situation that companies have relooked at their business decisions and decided to “look at their own backyard”, adds Kok, describing companies expanding across Asean.
Kok cites the most recent National Business Survey conducted by the SBF across 931 respondents, of which over 70% were SMEs. He notes that while Malaysia, Indonesia and Thailand were the top three countries businesses say they currently have a presence in while Vietnam was the top Asean country on the radar for future expansion.
At the conference, UOB elevated its MOU with Vietnam’s FIA to focus on high technology, digitalisation, green growth, sustainability, energy, semiconductors and finance related-FDIs. It also signed three MOUs with various government agencies and higher institutes of learning in both Vietnam and Singapore, making a VND876 million contribution to the University of Economics in Ho Chi Minh City as well.
Responding to a question about Vietnam’s contribution to UOB’s annual report, Ngo admits that the figure is still “quite small” compared to its Malaysian market where the bank has sunk in roots for the last 60 years. However, he says there is great potential and notes that the bank only began its subsidiaries five years ago and financial supply chain management solution this year.
“The story of Vietnam [for us] is more on the upcoming,” Ngo says. “We are at the right place at the right time,” he adds. “Because of what we’ve done over the last 30 years, when there’s now a focus on Vietnam as an end-consumer market with a population of 100 million people as well as being an alternative supply chain and, of course, with the Citi acquisition, the wind is in our direction to be able to leverage on this.”
Riverbank’s Shen concurs with Ngo. “Twenty years [of operations for us] in Vietnam is not considered long. We’re still in our infancy,” says Shen.
With the prospect of Vietnam’s growth, Shen is confident that his business will thrive as he teases expansion plans in the next year or so. “We know that UOB will always do right by us as we continue to grow.”
