Banks seek foreign partners

Sources say five joint stock banks are negotiating the sale of stakes to foreign investors.

Luu Duc Khanh, General Director of ABBank, one of the five, said that he has been negotiating with three potential partners over the last year.

“The foreign investor we choose must be one of the world’s leading banks, and must understand Asia’s and Vietnam’s markets. Particularly, the bank has to help ABBank improve retail banking services,” said Mr Khanh.

As planned, the negotiations will be wrapped up in the first quarter of 2008. The existing problem is the provisions relating to the technical assistance ABBank will receive from the foreign partner.

Sources say one of the three partners ABBank is negotiating with is a Malaysian banking group.

The East Asia Bank (EAB) has been conducting negotiations with three foreign partners in 2007, but no agreement has yet been reached. The biggest problem is the sale price.

Tran Phuong Binh, General Director of EAB, said that the bank is considering adjusting its plan on selling stakes to foreign investors. EAB may not invite strategic investors, but will instead call for separate investors. For example, if the bank aims to develop its securities services, it will call for investment from a foreign investor operating in the same field.

Mr Binh said that the bank’s directorial board will submit the plan on the adjustment at the shareholders’ meeting in February 2008.

Cao Thi Thuy Nga, Deputy General Director of Military Bank (MB), said that the negotiation on selling stakes to foreign investors has not been wrapped up since the foreign partner is auditing MB’s financial report.

“The foreign partner must have the same targeted clients as MB, and it must commit to not set up branches in Vietnam,” said Mrs. Nga.

She added that MB plans to wrap up the sale of stakes to foreign investors in 2008.

Meanwhile, Viet A Bank is still conducting negotiations with their foreign partner.

Analysts say banks will have to speed up the negotiations and reach an agreement this year because they need to become stronger to compete with rivals on the domestic market.

Vietcombank may become the first to wrap up the sale of its stakes to foreign investors this year. Vietcombank’s General Director Nguyen Phuoc Thanh said that the sale must be completed in the first quarter of 2008.

Bank shares most wanted

Commenting about the bank purchase deals in 2007, analysts said Eximbank’s was the most successful.

First, the bank garnered a capital surplus of VND9tril, the highest ever seen in terms of selling stakes to foreign investors.

Second, the bank sold its shares at a price eight times higher than face value. It is notable that the high price was inked at the time when bank share prices dropped dramatically

Third, Eximbank got the capital in actual money (in some other cases, banks got 70-80% of the total in money, while the remaining 20-30% was paid in technical assistance).

Eximbank’s successful deal showed that bank shares remain a valuable commodity that many foreign investors want.

Under the draft decree on foreign ownership ratio in local joint stock banks, foreign strategic shareholders can hold up to 20% of banks’ capital, over the previous 10%.

At least three banks have announced they would raise the percentages of shares they are holding in local banks, including HSBC in Techcombank, Deutsche Bank in Habubank, and UOB in Phuong Nam Bank.

Source: DTCK.