Foreign banks buying up foothold in Viet Nam

Friday, May 23, 2008
Foreign banks are gaining a strong foothold in the Vietnamese market by buying up domestic bank shares at a time when prices are at an all-time low.

Many foreign banks with contracts to purchase local bank shares are using the opportunity to increase their stakes to 15%, a level capped by the government.

The OCBC Group, one of leading financial institutions of Singapore, and the Viet Nam Private Bank (VP Bank) on May 14 finalised a proposal to obtain permission from the State Bank of Viet Nam (SBV)’s to raise OCBC’s stake in VP Bank to 15%.

The two sides agreed on a price 4.5 times higher than the nominal value (45,000 VND per share) despite the fact the price of shares, including the banks’ shares, are on a downward slide.

According to VP Bank General Director Le Dac Son, the transaction is expected to be completed by the end of May.

The UK ’s Standard Chartered Bank, a strategic partner of the Asian Commercial Bank (ACB), also bought ACB shares from the International Finance Company to increase its investment to 15% of shares and 15.86% of convertible bonds.

In March, Malaysia ’s Maybank inked a strategic cooperation agreement with the An Binh Joint Stock Bank (ABBank) and bought 15 percent of the ABBank’s charter capital (close to 2.14 trillion VND) at a price five times higher than the nominal value of the bank’s shares.

The Hong Kong-Shanghai Banking Corporation (HSBC) also increase its property at its strategic partner Viet Nam Technological and Commercial Bank (Techcombank) from 10% to 15%, or 539 billion VND.

Meanwhile, the Oriental Commercial Bank (OCB) and the Southern Bank have announced that their partners, France ’s BNP Paribas and Singapore ’s UOB, intend to raise their ownership stakes to 15%.

The moves illustrates foreign financial groups’ increasing interest in Vietnam as they eye its potential for business expansion.

In 2007, foreign-invested credit organisations in Viet Nam own 215 trillion VND.

According to the central bank, 37 branches and 53 representatives offices of foreign and joint-venture banks are operating in Viet Nam. (VNA)