INTERVIEW: HSBC Eyes Expansion In Virgin Vietnamese Market
Tuesday March 4th, 2008 / 15h42
By Ragnhild Kjetland Of DOW JONES NEWSWIRES LONDON -(Dow Jones)- With the official nod to locally incorporate in Vietnam, HSBC Holdings PLC (HBC) plans to increase its footprint and grab a big piece of a fast-growing retail banking market. Thomas Tobin, the chief executive of HSBC's operations in Vietnam, said Tuesday that estimates suggesting the number of private customer in Vietnam will increase by 15%-20% a year in the next couple of years "is on the low side." "It wasn't that long ago that less than 10% of the population had bank accounts, which makes for a tremendous potential for average customers to open accounts," Tobin told Dow Jones Newswires. "As the market continues to develop, there will be a need for convenient modern banking services." The bank, which so far has invested around $500 million in Vietnam, plans to inject another $100 million in capital to develop new products and service and on infrastructure. HSBC earlier Tuesday received "approval in principle" to locally incorporate in Vietnam, something which wasn't possible up until the country became a member of the World Trade Organization last year. "Being allowed to locally incorporate levels the playing field between foreign banks and local banks," Tobin said. He explained that previously, the bank could only operate under one address, and now it will be able to expand its distribution capabilities. HSBC hopes to open a few more branches and sub-branches in Ho Chi Minh City and surrounding cities. "So far, HSBC's core business (in Vietnam) was business and commercial banking, and being a bridge for companies coming into Vietnam. But, as demand grows, we want to offer more personal financial services, and banking for smaller and medium-sized businesses." In order to do that, he said, a prerequisite is distribution-capability. In 2007, HSBC's business in Vietnam almost doubled, Tobin said, although he declined to give concrete targets for new customers or profits on the back of Tuesday's approval. "We'll continue to grow at a pretty robust pace." As for customer numbers, he said the bank isn't chasing a particular number of new customers: "At the moment, there's still lots of business to go around, so it's a matter of developing the business to meet the needs." Currently, HSBC employs 800 people in Vietnam, up from around 300 at the same time last year. Tobin said the major constraint in going after retail and SME customers in a market like Vietnam is finding qualified people. The bank hires mostly fresh graduates and trains them to be bankers. HSBC has been present in Vietnam since opening its first office in Saigon, now Ho Chi Minh City, in 1870. HSBC already has two branches, along with a head office in Ho Chi Minh. The group is also present in Vietnam through a 15% stake in the Vietnam Technological and Commercial Joint Stock Bank, or Techcombank, and through a 10% stake in Bao Viet Holdings, an insurance company. Tobin said HSBC is in talks to increase the stake in Techcombank to 20%. "The law says 15% is the upper limit, but it is possible to seek the prime minister's permission to get 20%," he said. HSBC also has the option to raise its stake in Bao Viet to 25%, when and if regulation lifts the legal upper limit for foreign ownership. HSBC on Monday reported a 21% increase in group net profit as sharp growth in Asian operations helped offset losses on exposure to subprime lending in the U.S. In 2007, Asia and emerging markets contributed 64% of group profit. People in the industry said that Standard Chartered PLC (STAN.LN) was also Tuesday granted the approval-in-principle to locally incorporate in Vietnam. Standard Chartered, which in February reported a 25% increase in net profits driven largely by profitable wholesale business in Asia, couldn't immediately be reached to comment. Company Web site: http://www.hsbc.com -By Ragnhild Kjetland; Dow Jones Newswires; +44 207 842 9268; ragnhild.kjetland@dowjones.com
