1u29
03-02-2007, 10:10 AM
Global Banks Continue
Their Push Into Vietnam
By KATE LINEBAUGH
February 2, 2007 12:05 a.m.; Page C3
HONG KONG -- For banks expanding in Asia, Vietnam could be the new China.
Since the beginning of the year, three banks have announced investments in Vietnamese lenders. In the latest deal, announced yesterday, Deutsche Bank AG, of Germany, agreed to buy as much as 20% of Hanoi Building Commercial Joint Stock Bank for an undisclosed sum. Britain's HSBC Holdings PLC and Singapore's Union Overseas Bank Ltd. have also announced investments.
Staff of Habubank in Vietnam disburses a loan to a private-business client.
Vietnam is all the rage in Asian finance circles, from private-equity shops to investment bankers. It gained entry to the World Trade Organization last month. The country's annual economic growth of about 8% is second in Asia only to China's. Vietnam offers banks a high savings rate and, according to a report by UBS AG, a population of about 85 million, about half of which is younger than 25 years old.
"You're looking at one of the fastest-growing economies in Asia," says Alistair Scarff, a regional banking analyst at Merrill Lynch & Co. "You're looking at a younger population. You're looking at an underpenetrated banking sector in a market that has the potential to be quite large. All the ingredients of what attracts bank investors are all lined up."
As part of Vietnam's entry into the WTO, the government agreed to loosen restrictions on foreign banks. Foreign ownership of local banks is capped at 30%, and no single foreign entity can hold more than 10%. Bankers and analysts widely expect that cap to be raised to 20% soon.
Two years ago, global banks were marching into China as the country's domestic lenders sought foreign expertise and capital ahead of the opening of the banking sector to foreign rivals last December. Global giants like Bank of America Corp. and Royal Bank of Scotland Group PLC paid billions of dollars for small stakes in the country's biggest lenders. Those investments have turned into hefty gains.
In Vietnam, the sums are much smaller. Last week, HSBC said it agreed to pay $71.5 million to increase its stake in Vietnam Technological & Commercial Joint-Stock Bank, or Techcombank, to 20% from 10% as soon as regulations allow. That is more than four times what it paid for its original 10% stake in December 2005, but a fraction of the $1.75 billion the British bank paid for its 19.99% stake in Bank of Communications Ltd., of China. Singapore's UOB paid $30 million for 10% of Vietnam's Southern Commercial Joint Stock Bank and will pay $29 million for the next 10% when the ceiling rises.
Deutsche Bank, in its own deal, is looking to establish partnerships with Habubank, as the lender is known, in credit cards, wealth management and the development and distribution of investment products. The German bank will also provide assistance in risk and treasury management. It will become the Vietnamese lender's single largest shareholder and will have representation on the board, according to Deutsche Bank.
Habubank has 21 branches across the country and $750 million in assets. It is Vietnam's sixth-largest partly private commercial joint-stock bank by assets.
"Deutsche Bank believes in the growth potential of Vietnam," says Rainer Neske, the bank's head of private and business clients.
Merrill's Mr. Scarff cautions that the optimistic view should be tempered by the significant overhauls still needed in Vietnam, such as strengthening banks' asset quality and improving disclosure and corporate governance. The government is attempting to address these issues by bolstering banking supervision and revising the capital structure of the country's biggest banks. It is preparing some of the biggest banks for public stock offerings that may happen as early as this year.
"We believe it makes sense to have a twofold strategy," says HSBC Vietnam Chief Executive Alain Cany. He says the bank plans to build its own high-end business there, while at the same time tapping the consumer and retail markets through its stake in Techcombank. "That's very similar to our model in China."
Mr. Cany says he expects to expand HSBC's branch network to 15 to 20 branches in the next three to five years, from two now, while helping Techcombank double or triple its network of 90 branches over the same period.
Source: The Wall Street Journey
http://online.wsj.com/article/SB117031727850694813-search.html?KEYWORDS=Global+lenders+%2B+Vietnam&COLLECTION=wsjie/6month
Their Push Into Vietnam
By KATE LINEBAUGH
February 2, 2007 12:05 a.m.; Page C3
HONG KONG -- For banks expanding in Asia, Vietnam could be the new China.
Since the beginning of the year, three banks have announced investments in Vietnamese lenders. In the latest deal, announced yesterday, Deutsche Bank AG, of Germany, agreed to buy as much as 20% of Hanoi Building Commercial Joint Stock Bank for an undisclosed sum. Britain's HSBC Holdings PLC and Singapore's Union Overseas Bank Ltd. have also announced investments.
Staff of Habubank in Vietnam disburses a loan to a private-business client.
Vietnam is all the rage in Asian finance circles, from private-equity shops to investment bankers. It gained entry to the World Trade Organization last month. The country's annual economic growth of about 8% is second in Asia only to China's. Vietnam offers banks a high savings rate and, according to a report by UBS AG, a population of about 85 million, about half of which is younger than 25 years old.
"You're looking at one of the fastest-growing economies in Asia," says Alistair Scarff, a regional banking analyst at Merrill Lynch & Co. "You're looking at a younger population. You're looking at an underpenetrated banking sector in a market that has the potential to be quite large. All the ingredients of what attracts bank investors are all lined up."
As part of Vietnam's entry into the WTO, the government agreed to loosen restrictions on foreign banks. Foreign ownership of local banks is capped at 30%, and no single foreign entity can hold more than 10%. Bankers and analysts widely expect that cap to be raised to 20% soon.
Two years ago, global banks were marching into China as the country's domestic lenders sought foreign expertise and capital ahead of the opening of the banking sector to foreign rivals last December. Global giants like Bank of America Corp. and Royal Bank of Scotland Group PLC paid billions of dollars for small stakes in the country's biggest lenders. Those investments have turned into hefty gains.
In Vietnam, the sums are much smaller. Last week, HSBC said it agreed to pay $71.5 million to increase its stake in Vietnam Technological & Commercial Joint-Stock Bank, or Techcombank, to 20% from 10% as soon as regulations allow. That is more than four times what it paid for its original 10% stake in December 2005, but a fraction of the $1.75 billion the British bank paid for its 19.99% stake in Bank of Communications Ltd., of China. Singapore's UOB paid $30 million for 10% of Vietnam's Southern Commercial Joint Stock Bank and will pay $29 million for the next 10% when the ceiling rises.
Deutsche Bank, in its own deal, is looking to establish partnerships with Habubank, as the lender is known, in credit cards, wealth management and the development and distribution of investment products. The German bank will also provide assistance in risk and treasury management. It will become the Vietnamese lender's single largest shareholder and will have representation on the board, according to Deutsche Bank.
Habubank has 21 branches across the country and $750 million in assets. It is Vietnam's sixth-largest partly private commercial joint-stock bank by assets.
"Deutsche Bank believes in the growth potential of Vietnam," says Rainer Neske, the bank's head of private and business clients.
Merrill's Mr. Scarff cautions that the optimistic view should be tempered by the significant overhauls still needed in Vietnam, such as strengthening banks' asset quality and improving disclosure and corporate governance. The government is attempting to address these issues by bolstering banking supervision and revising the capital structure of the country's biggest banks. It is preparing some of the biggest banks for public stock offerings that may happen as early as this year.
"We believe it makes sense to have a twofold strategy," says HSBC Vietnam Chief Executive Alain Cany. He says the bank plans to build its own high-end business there, while at the same time tapping the consumer and retail markets through its stake in Techcombank. "That's very similar to our model in China."
Mr. Cany says he expects to expand HSBC's branch network to 15 to 20 branches in the next three to five years, from two now, while helping Techcombank double or triple its network of 90 branches over the same period.
Source: The Wall Street Journey
http://online.wsj.com/article/SB117031727850694813-search.html?KEYWORDS=Global+lenders+%2B+Vietnam&COLLECTION=wsjie/6month