Vietnamese banks see exodus of foreign partners

The last few years have seen a number of cases of foreign partners severing ties with Vietnamese banks.

Last week Hanoi-based private creditor SeABank confirmed that French strategic partner Société Générale Group (SocGen) has sold out its 20 percent stake after a 10-year collaboration.

According to a SeAbank spokesperson, the sale was part of SocGen’s recent strategy of exiting non-core markets in all of Asia to consolidate its positions in places where it is already strong.

In January 2018 the UK’s Standard Chartered Bank ended its 12-year partnership with Asia Commercial Bank, one of the largest private banks in Vietnam by assets.

It said it was under pressure to cut costs after suffering losses in emerging markets.

A month before that French bank BNP Paribas offloaded its entire 18.68 percent stake in Orient Commercial Bank, ending a 10-year alliance.

Some industry experts said there is a clear tendency now among foreign lenders not to spread their investments thin and instead focus on markets where they have a competitive advantage.

In 2017 Hong Kong based-HSBC announced the sale of its nearly 20 percent stake in major private lender Techcombank. Securities firm Ho Chi Minh Securities Corporation then called it "not surprising", saying it might partly have been due to management issues.

HSBC’s influence at Techcombank had been waning since 2012, with the security firm believing it was due to a potential conflict of interest since the two banks competed in the same market.

Like Standard Chartered, HSBC was licensed to open a wholly owned locally incorporated bank in Vietnam. Meanwhile, Techcombank failed to pay HSBC dividends for several years.

Speaking to VnExpress, VPBank general director Nguyen Duc Vinh expressed regret that foreign investors are seeing Vietnam only as a short-term investment destination.

But there have been instances of divestment purely for commercial reasons such as when ANZ sold its stake in Sacombank because buyers offered a good price.

Similarly, in 2013 Singaporean bank OCBC sold its nearly 15 percent stake in VPBank after over seven years when it received "an offer it could not refuse" from domestic buyers.

Singapore Business Review reported the price was 35 percent higher than what OCBC paid. This is after the bank had received a bonus issue of 14.25 percent a year earlier.

The wave of divestments began around 2011, when Vietnam’s financial system fell into a crisis. The lingering aftershock of the 2008 global financial crisis and the consequences of unregulated lending to invest in securities and real estate caused economic instability.

Foreign banks first started exploring partnerships with Vietnamese banks in 2005, starting with deals between ACB and Standard Chartered, Techcombank and HSBC, and Sacombank and ANZ.

The growth of the country’s financial system, the potential of its banking sector and a stock market that was constantly rising to new peaks made Vietnamese banks very attractive targets for foreign investors. It gave the foreign investors, besides the direct commercial benefits, the chance to enter a highly attractive market when it was still in its infancy.

Subsequently, OCB, ABBank, state-owned Vietcombank, SeABank, VIB, and state-owned VietinBank, the biggest lender in Vietnam at the time by assets, also entered partnership deals with foreign banks.

The trillions of dong ($1 = VND23,199) flowing in from these deals added resources to the banking sector, helped increase the capital of many banks and stimulated business growth.

According to a recent report by Saigon Securities Inc, the banking sector experienced a good year in 2018, with profits rising by 31.3 percent year-on-year to VND68.01 trillion ($2.92 billion).

But experts believe profits peaked last year.

According to HSBC Vietnam CEO Pham Hong Hai, profits could go down this year as the State Bank of Vietnam tries to bring down credit growth, which is targeted at 14 percent.

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