HSBC has received approval from the
State Bank of Vietnam to increase its stake in VietnamTechnological
and Commercial Joint-Stock Bank (Techcombank) from 10 percent to 15
percent for a total consideration of VND539.4 billion ($33.7
million).

The deal caps a month of busy interest
in the developing Asian economy: Australia’s ANZ has also bought
into the country, buying a 10 percent stake in local institutional
brokerage SaigonSecurities, while South Korea’s Shinhan has hinted
it may take a stake in state-controlled Bank for Foreign Trade of
Vietnam (Vietcombank).

HSBC says it is the first foreign bank
to receive approval for a 15 percent strategic investment in a
domestic Vietnamese bank.

HSBC purchased an initial 10 percent
interest in Techcombank in December 2005, at the time the largest
stake a foreign institution could hold in a Vietnamese bank.
Techcombank has around 200,000 personal and over 10,000 commercial
customers through a network of 73 branches in 16 provinces and
cities.

Founded in 1993, Techcombank is the
country’s third-largest joint stock bank, with assets of VND25
trillion as at 31 May 2007.

Up stake to 20 percent

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In April, the government of Vietnam passed a decree
to allow foreign banks to own 15 percent of a Vietnamese commercial
bank, an amount that may be increased to 20 percent subject to
approval from the Vietnamese government. HSBC says it will apply to
the government for a second tranche of shares to take its stake in
the bank to 20 percent.

The UK-headquartered bank says Vietnam, boasting a population of
over 84 million, has benefited from average GDP growth of over 7
percent in recent years. GDP per capita has doubled over the past
ten years and foreign direct investment grew by 55 percent in 2006
to a record high.

In February of this year (see RBI 566), Deutsche Bank
signed an agreement with Hanoi Building Commercial Joint Stock Bank
(Habubank) to take up to a 20 percent stake in the Vietnamese
player as the German bank looked to expand its presence in Vietnam
and the wider Asia-Pacific region.

Financial terms were not disclosed.
Deutsche said at the time it would be looking to invest in key
areas such as credit cards and affluent banking as well as the
development and distribution of investment products.

Also in February, French group BNP Paribas formed an insurance
joint venture with local banks Vietcombank and Seabank. Previously,
in November 2006, it bought 10 percent of Orient Commercial Bank
(OCB), the country’s ninth-largest bank.

The French bank’s insurance arm, Cardif, signed distribution
agreements with Vietcombank, the leading bank in the country, and
Seabank, to sell life insurance, personal protection and savings
products.

The two partnerships led to the
creation of a joint venture, held 43 percent by Cardif, 45 percent
by Vietcombank and 12 percent by Seabank, which has initially
distributed savings and personal protection products through the
networks of the two partner banks. BNP Paribas said at the time of
buying the 10 percent stake in OCB it would increase ownership in
the bank “once the required administrative authorisations have been
given. This share will then rise to 20 percent when national
legislation permits.”

Upgrade bank ratings

In May, ratings agency Fitch upgraded the individual ratings of
Vietnam’s big four state-owned commercial banks – Bank for
Investment and Development of Vietnam (BIDV), Incombank, Agribank
and Vietcombank – which together account for around 75 percent of
system-wide assets.

 The upgrades, said the agency,
reflected a number of positive developments at the banks, including
better underlying profitability thanks to higher margins resulting
from a higher interest rate, and a shift towards more
private-sector lending by the banks.

Of greater note, however, at least in the cases of BIDV, Incombank
and Vietcombank, have been the positive developments in the
preparations for their initial public offerings planned for late
2007/early 2008.

Vietcombank is farther ahead than the other banks in terms of
balance sheet cleaning and commercialisation, hence its higher D
rating, said Fitch. But the agency warned that in the case of all
the banks’ ratings, downside pressure could arise if there was any
deterioration in Vietnam’s economy.

“While this is not expected… in the
event that there is economic volatility, it could be particularly
problematic for the banks given their generally very strong loans
growth over recent years. Over the three years to end-2005, the
four banks’ loan books grew 82 percent; much of this has been to
private-sector borrowers, which are of a higher risk than the
country’s better quality state-owned enterprises, as well as being
a relatively new area for the banks,” said Fitch.