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HO CHI MINH CITY: Five international banks are vying to acquire stakes in Vietnam's two biggest private commercial banks, as a first step towards penetrating the country's potentially vast retail banking market, people close to the negotiations said.
The suitors for Vietnam's Sacom Bank and Asia Commercial Bank are understood to be HSBC, ANZ, Standard Chartered, Citibank and Singapore's DBS; all are keen to expand in one of Asia's fastest-growing economies that has 80m people.
Deepak Khanna, country representative of the International Finance Corporation (IFC) , the World Bank's private-lending arm, confirmed that both Sacom and ACB were negotiating with multiple potential strategic partners. He declined to identify the banks. The IFC has stakes of 8.0 to 10 per cent in the two Vietnamese banks.
"What these banks are looking for is to participate, albeit in a minority way, in Vietnam's retail banking market," Khanna said. "The prices are getting bid up, and we are delighted so many quality banks are coming to the party."
Vietnam limits foreign ownership of local companies to 30 per cent. No individual foreign investor can hold more than a 10 per cent stake. But Khanna said even small stakes in one of the two Vietnamese banks would give strategic partners a toe-hold in an otherwise closed local market with room to grow.
Vietnam's bank deposits-to-GDP ratio is about 50 per cent; up from 35 per cent in the late 1990s, but below the east Asian average of 95 per cent. "There are lots of savings under the mattresses," Khanna said.
Vietnam's domestic banking market is dominated by five state-run commercial banks that account for nearly 75 per cent of the financial system's $19bn assets. Yet they are believed to have high levels of bad loans.
Sacom and ACB, with extensive branch networks, are the biggest of Vietnam's 38 so-called "joint stock" or private banks, which account for only 14 per cent of financial system assets.
Vietnam limits wholly foreign-owned banks to two branches and tends to restrict them to multinational clients.
Sacom, 20 per cent owned by the IFC and a fund managed by Dragon Capital -- a private investment bank -- has total assets of about $660m, including outstanding loans of $380m, and recorded $12m in profits last year, Khanna said. ACB, a more conservative lender 22 per cent owned by the IFC, the Dragon Capital fund, and Jardine Matheson, has $860m in total assets. Its outstanding loans and profits, were about the same as Sacom's last year.
— FT Syndication Service
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