Deutsche Bank to buy limited share of Habubank

Deutsche Bank AG has received the informal nod from Vietnam’s central bank to buy a 10% stake in a local commercial bank.

The firm initially sought 20%, which is only allowed in extraordinary cases.

The State Bank of Vietnam (SBV) released a statement saying that Deutsche Bank and the
Hanoi Building Commercial Joint Stock Bank (Habubank) would soon complete procedures for the acquisition to then be submitted to SBV for the formal approval.

The two banks have entered into a strategic co-operation explore potential partnership in areas such as credit cards, affluent banking and the development and distribution of investment products.

Deutsche Bank has also committed to assist Habubank in managing financial sources and banking business risk.

Earlier the German bank had proposed to buy up to 20% stake in Habubank, expecting to become its largest shareholder be represented on the lender’s management board.

Under Vietnam’s current banking regulations, a foreign bank can only own 10% of a Vietnamese bank, while total foreign holdings are capped at 30%. In exceptional cases, the government can allow a foreign bank to own up to 20% of a Vietnamese bank if proposed by the SBV.

Deutsche Bank is known as a leading bank in both homeland and the EU. The bank is developing a network to 72 countries worldwide.

It opened its first Vietnamese branch in 1992.

Habubank is Vietnam's sixth-largest private commercial joint stock bank by assets and is one of the best-capitalized Vietnamese banks with 21 branches in the country.
It held around VND12 trillion ($748 million) in assets with a pre-tax profit of VND248 billion at the end of last year.

Overseas banks have been eager to tap the growing demand for credit in Vietnam, a nation of 84 million people where only 5% use banking services.

At least two more banking groups are now waiting for the Vietnam central bank to raise the cap on foreign ownership to buy an additional 10% stake of two local banks.

The Vietnamese Orient Commercial Joint Stock Bank, or OCB, said it was ready to sell an additional 10% of its shares to the French banking group BNP Paribas, which last year acquired a 10% stake of OCB.

Earlier this year, HSBC announced it would pay $71.5 million to double its 10% stake in Vietnam Technological and Commercial Joint Stock Bank (Techcombank), the country’s third-largest joint stock bank by assets.

Vietnam's joint-stock banks were small in size and controlled only 15% of the lending market in 2005, while state-owned commercial banks controlled 75% of the lending market.
Most economists believe the rapidly evolving nation will achieve its target of an annual 7.5-8% real GDP growth over the next five years, making it one of the most attractive markets in the region.

Deutsche Bank , HSBC and UOB obviously see immense growth opportunities for their businesses in this environment and are taking steps to create a foothold.

Source: Thanh Nien