Banks say they are willing to set up branches or transaction offices in areas where there are already too many banking facilities because “birds of a feather flock together,” but in reality, they fiercely compete with each other to win customers.

Many bustling streets in Ho Chi Minh City mirror New York’s Wall Street, with a surplus of banks stuffed into small areas.

With their biggest competitors as their next-door neighbors, they have to fight hard to win the market.

Often, bank employees are forced out of their air-conditioned offices onto the streets to attract customers. Thus, a transaction office based in District 4 may have customers who live in District 1 or 7, or even further districts such as Binh Thanh or Phu Nhuan.

Other competition methods include offering higher interest rates or imitating promotional programs of rival banks.

The director of the District 3 branch of a joint stock commercial bank said that the volume of his institution’s mobilized savings has been on decline as other competitors have lured customers with higher interest rates.

Savings of a term under 6 months are subject to a ceiling interest rate set by the State Bank of Vietnam, but banks can negotiate the rates with customers for deposits of longer terms.

Many banks reported that their promotional campaigns failed to take full effect as they were immediately copied by rival banks.

Expand at all cost

The tough competition and the huge expense of maintaining a wide network of branches and transaction offices do not seem to discourage banks from expanding further.

The chief official of a small bank said banks always carry out market research for future locations in advance.

Factors like resident density, consumer behavior, average earning level, and foot traffic are carefully considered.

But even when research suggests a new office should not be set up, banks continue their plans because they can “ignore these facts when the streets are so bustling and crowded, and more importantly, when other banks have already built facilities there,” the banker said.

In early September, the SBV released Circular No.21, setting tighter regulations on the network expansion of banks in an attempt to reduce the neglect of banking networks in other provinces and distant areas by banks located in urban areas.

Following the Circular, many banks said they will review and restructure their networks.