Vietnamese banks: foreign investor magnets
(Updated: April 04, 2008)
VietNamNet Bridge – While domestic investors are indifferent to bank shares as they think that banks will have a difficult year in 2008 due to the government’s tightened monetary policy, foreign investors are planning to buy Vietnamese bank shares at high prices.
The decision by the State Bank to limit the credit growth rate at 30% this year has forced many banks to lower their targeted profit goals, and this has made local banks less attractive in the eyes of domestic investors.
However, foreign investors have a different perspective. George Mathewson, former Chairman of Scotland’s Royal Bank, and now Chairman of Toscafund, an investment fund, said that Royal Bank and Toscafund are very interested in Vietnamese banks’ share issuances. Toscafund is now managing the total assets of $10bil, and the fund is considering injecting some $200mil in Vietnam.
The biggest attraction of Vietnamese banks is that they are full of potential. The recently released survey by McKinsey shows that the total turnover of banking retail services may have the growth rate of more than 25% per annum in the next 5-10 years, the highest growth rate in Asia. Vietnam’s card market is growing rapidly by 300% a year.
Le Xuan Nghia, Director of the Banking Development Strategy Department under the State Bank of Vietnam, said that the finance-banking market in Vietnam has great potential. Once inflation is restrained, and the national economy is growing well, the demand for credit and banking services will be increasingly high.
According to Nghia, Vietnam ranks 6th in the world in potential to attract investment. The banking sector in particular is considered to have great potential in Vietnam as only 8% of population uses banking services currently.
Recently, Maybank reached a strategic cooperation agreement with Vietnam’s ABBank, under which the former will purchase 15% of the latter. Maybank will raise its ownership ratio in the bank by another 5% once this is approved by the government of Vietnam.
The fact that a financial institution listed among the world’s 200 biggest banks is purchasing ABBank shares at a price five times higher than the face value shows that ABBank in particular, and Vietnamese banks in general, are considered attractive investment destinations, and worth committing to long-term investment in.
(Source: VietnamNet)