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Five Intl Banks Set Sights On Way Into Vietnam -FT



March 2, 2005 7:18 p.m.

TOKYO -- Five international banks are vying to acquire stakes in Vietnam's two biggest private commercial banks as a first step toward penetrating the country's potentially vast retail banking market, The Financial Times reported in its Thursday international edition, citing people close to the negotiations.

The suitors for Vietnam's Sacom Bank and Asia Commercial Bank are understood to be HSBC, ANZ, Standard Chartered plc (STAN.LN), Citibank and Singapore's DBS, the FT said.

Deepak Khanna, country representative of the International Finance Corporation, the World Bank's private lending arm, confirmed that both Sacom and ACB were negotiating with multiple potential partners, but he declined to identify the banks. The IFC has stakes of 8-10% 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%, while no individual foreign investors can hold more than a 10% stake in a company. 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 that still has plenty of room to grow.

Vietnam's bank deposits-to-GDP ratio is about 50%, up from 35% in the late 1990s, but still well below the east Asian average of 95%. There are lots of savings under the mattresses, Khanna said.

Vietnam's domestic banking market is dominated by five state-run commercial banks, which together account for nearly 75% of the financial system's total of US$19 billion in assets. However, the state banks are believed to be carrying high levels of bad loans.

Sacom and ACB are the biggest of the country's 38 so-called joint stock, or private banks, which account for just 14% of financial system assets.

Vietnam limits wholly foreign-owned banks to two branches and mainly restricts them to serving multinational clients.

Sacom has total assets of about $660 million, including outstanding loans of $380 million, and recorded $12 million in profits last year, Khanna said. ACB has $860 million in total assets, although its outstanding loans and profits were about the same as Sacom's last year.