VIETNAM What would the “marriages” of Vietnamese and foreign banks bring?

What would the “marriages” of Vietnamese and foreign banks bring?

VietFinanceNews.com - Both the Vietnamese and foreign sides put high hopes on the strategic cooperation between them. However, in many cases, the cooperation cannot bring the things they want.

Injecting money into Vietnamese banks and becoming strategic partners, foreign investors believe that they can intervene in the business strategies of the banks. However, it’s not easy to do that.

Meanwhile, Vietnamese bankers believe that having foreign strategic partners is the easiest way for success. However, in many cases, the result is not as perfect as they expected.

HSBC-Techcombank – the perfect couple?

Most domestic joint stock banks, which have a small scale of operation with the modest chartered capital of 3000-5000 billion dong and earn money mostly on lending, want to join hands with foreign banks, which have powerful financial capability and good corporate governance.

They believe that the thorough knowledge of Vietnamese banks about the Vietnamese market and the high technologies of foreign banks would generate perfect entities.

As such, the marriage between HSBC and Techcombank seemed to create a “perfect couple.” The British bank bought 10 percent of Techcombank’s stakes in December 2005, and then bought 5 percent more in July 2007, raising its ownership ratio in the bank to 15 percent.

In September 2008, HSBC became the first foreign bank in Vietnam holding 20 percent of stakes of a Vietnamese bank, the highest foreign ownership ratio allowed by the State Bank, after it bought five percent more.

With the support of HSBC, Techcombank has joined the two biggest card alliances in Vietnam – Smartlink and Banknet.vn. Besides, HSBC has also helped Techcombank connect its ATM network with HSBC’s ATM network

Meanwhile, Deputy President of Techcombank, former CEO of the bank, simply said that the foreign strategic partner has helped the bank check its policies and build up the personnel structure in accordance with the modern governance model, and that a lot of important tasks have been completed by the two sides.

Especially, Techcombank maintains the “co-finance director” mechanism with one from Techcombank and the other from HSBC. The finance report of Techcombank has been made in accordance with international standards, which could be seen as the “hallmark” of HSBC.

Interest rate initiative to benefit firms


VietFinanceNews.com - A lending rate move is to ease pressure on squeezed businesses. From May 8, the maximum lending rate for businesses in four priority areas was driven down to 15 per cent, per year with an Eximbank representative saying enterprises and banks would welcome the change.

“The current short-term interest rate on the interbank market fell to less than 5 per cent per year, indicating banks’ better liquidity. Meanwhile, the banking sector credit growth contracted in the first three months of 2012. Hence, ceiling lending is important to help firms and businesses ‘meet’ each other,” according to the Eximbank source.

HDBank deputy general director Pham Thien Long said lending to export producers would be most viable of the four set priority areas, export production, agriculture and rural areas, supporting industries and small- and medium-sized enterprises (SMEs), benefited from ceiling move.

“Export producers often want dollar-denominated loans to shirk high VND lending rates since they have dollar income sources. Hence, we can easily handle the lending cap with this sort of firms,” said Long, adding that current dollar lending rates were pegged at around 5-7 per cent, per year.

Long had attributed SMEs’ lack of financial transparency, poor money flow governance capacity and family-style business to why they struggled to get loans.

A senior executive in a Ho Chi Minh City-based bank said many SMEs came below par in terms of lending requirements, hence the 15 per cent per year lending cap would not mean lower-cost loans were equally available to firms.

With the central bank’s support, banks promoting lending to agriculture and rural areas was a viable task. For instance, HDBank got a 12 per cent per year interest rate supportive credit package from the State Bank to lend agriculture and rural areas, said Long.

Vietnam Small and Medium Size Enterprises Association chairman Cao Sy Kiem said ceiling lending partly met SMEs’ aspirations.

However, Kiem said while the rates may seem tempting, few SMEs could access loans due to stringent lending requirements.

http://www.vietfinancenews.com/2012/05/interest-rate-initiative-to-benefit.html