Vietnam's banking sector heats up

Deutsche becomes the third bank within a week to announce an investment in a Vietnamese bank.
It was a hat trick for VietnamÆs banking sector as Deutsche Bank became the third bank to finalise an investment in a local bank after announcements by United Overseas Bank (UOB) and HSBC. All three transactions have been announced in the same week.

The spate of interest is fuelled by expectations that banking laws in the country - which currently allow a foreign shareholder to own up to 10% of a joint stock commercial bank û will shortly be relaxed to allow 20% foreign ownership.

Deutsche Bank said yesterday it will acquire up to 20% of VietnamÆs Hanoi Building Commercial Joint Stock Bank (Habubank) and become the single largest shareholder. Deutsche will be entitled to representation on the board of Habubank. No financial terms of the deal were disclosed.

Habubank is Vietnam's sixth-largest private commercial joint stock bank by assets and is one of the best-capitalised Vietnamese banks with a network of 21 branches and around 560 employees. It ended the year with assets of about 12 trillion dong ($748 million) and profit before tax of 248 billion dong. Commenting on the acquisition, Colin Grassie, chief executive of Deutsche Bank Asia-Pacific, referred to Vietnam as ôan important growth market in the Asia-Pacific regionö.

This acquisition follows a move by Deutsche in October 2005 to buy 14% of Hua Xia Bank in China and underscores how important a presence in Asia is becoming to the expansion plans of global banks. Indeed, in announcing fourth quarter results earlier yesterday û the best ever for the bank - Dr. Josef Ackermann, chairman of the management board of Deutsche Bank observed: ôGeographical boundaries are disappearing, and emerging markets are growing in importanceö.

On January 25, UOB of Singapore announced it would acquire 10% in Southern Commercial Joint Stock Bank in Vietnam for S$46 million ($29.9 million) and would up its stake by another 10% when regulation permitted paying another S$44 million. Southern Commercial had net tangible assets of approximately S$158 million and an issued capital of S$124 million on November 30, 2006. It has a network of 46 branches and 980 employees.

Both Deutsche and UOB highlighted the technical support and assistance they would provide to the Vietnamese partner as a strategic shareholder.

On January 28, HSBC announced it would pay $71.5 million to double its 10% stake in Vietnam Technological and Commercial Joint Stock Bank (Techcombank) as soon as regulations permitted.

Most economists are bullish on Vietnam and believe it will achieve its target of 7.5%-8% real GDP growth over the next five years, making it one of the most attractive markets in the region. Deutsche, HSBC and UOB obviously see immense growth opportunities for their businesses in this environment and are taking steps to create a foothold.
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