HSBC, StanChart step up banking in Vietnam

By Ho Binh Minh

HANOI (Reuters) - HSBC Holdings Plc (HSBA.L) (0005.HK) and Standard Chartered Plc (STAN.L) have won approval to be the first foreign banks to open wholly owned units in Vietnam, as the communist-run state opens up to foreign investment.

HSBC, Europe's largest bank, which first arrived in Vietnam in 1870, said on Tuesday it would headquarter its Vietnam-based bank in Ho Chi Minh City, the country's commercial centre.

"We aim to start operating through our new local entity as early as possible," HSBC's local CEO Thomas Tobin said, adding HSBC hoped to be the first foreign bank to operate a fully owned local bank in the fast-growing Vietnamese banking sector.

Standard Chartered said it should start local operations soon, and expects the central bank's move to boost bank services and competition for consumers and companies raising funds.

"This is a clear sign to show Vietnam's strong commitment toward WTO," the State Bank of Vietnam central bank said in a statement. Vietnam is opening up more to foreign banks as part of its commitments to the World Trade Organisation, which it joined last year.

HSBC and Standard Chartered now have 12 months to start operations in Vietnam, where only 10 percent of the 86.5 million population have bank accounts. State-run Agribank, Vietnam's biggest enterprise, runs half of the 4,000 bank branches.

HSBC and Standard Chartered, now operating branches in Hanoi and Ho Chi Minh City, are among nearly 40 foreign banks in the country, accounting for 14 percent of lending between them.

HSBC Bank Vietnam would have a registered capital of $182 million and Standard Chartered's Hanoi-based bank will have a capital base of $61 million, the State Bank of Vietnam said.

The central bank has said it aimed to keep the country's credit growth this year at 30 percent, after a 54 percent surge in 2007, to control double-digit inflation.

COMPETITION

HSBC and Standard Chartered would compete with four Vietnamese state-run banks, the country's top lenders, while more than half of the 37 partly private banks now in operation are small entities, with total assets of less than $1 billion each.

"Local incorporation will allow us to have a broader distribution network to reach existing and new customers," HSBC's Tobin said.

Standard Chartered, whose first branch in Saigon opened in 1904, plans to open up to 30 new branches in Vietnam over the next three to four years, it said in March after winning initial approval from the Vietnamese government.

Standard Chartered Vietnam Chief Executive Ashok Sud said it would introduce appropriate savings, personal loan, wealth management, transaction banking, and currency deposit products for Vietnamese needs. "This will help increase industry standards and competitiveness," Sud said.

It will also provide increased support for Vietnamese companies looking to tap international financial markets and raise project financing, he said.

Besides six joint venture banks, more than 20 financial leasing companies and nearly 1,000 small credit funds also operate in Vietnam.

More competition would come from foreign banks, ANZ (ANZ.AX) among them, with a long presence in Vietnam, which have been seeking permission to open wholly owned banks.

Apart from banking activities, HSBC and Standard Chartered have bought stakes in local banks, with HSBC recently increasing its stake in Hanoi-based Techcombank to 20 percent and Standard Chartered taking 15 percent of Asia Commercial Bank ACB.HN.

(Additional reporting by Steve Slater in London, editing by Anshuman Daga and Will Waterman)