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Walking tall in a stunted market   2009-03-28 - VietNamNet/VIR

The Hongkong and Shanghai Banking Corporation Limited (HSBC) set up a wholly foreign-owned bank in Vietnam in January 2009, the first of its kind since Vietnam opened up the local market for foreign players under its World Trade Organization commitments. HSBC Bank (Vietnam) Ltd chairman Paul Leech tells VIR about the bank's strategy to move forward in a turbulent environment.

 

HSBC Bank (Vietnam) Ltd chairman Paul Leech

HSBC has started operating as a 100 per cent, foreign-owned bank in Vietnam when the local economy is facing some turbulence. Will the bank have to make adjustments to its strategy this year?

 

Of course when we first made our strategy to open, the world was a bit different. However, the interesting thing is actually that our strategy has not changed despite the more adverse climate around the world, which has also impacted on Vietnam and other countries.

 

I mean our strategy in Vietnam is that we will continue to be an investor here and HSBC’s establishment of the first wholly foreign-owned bank in the country was a concrete indication of what our plans are. With our strategic partners Techcombank and Bao Viet, we are looking for chances to cooperate.

 

We actually see these as good and long-term opportunities to get our business model right in this market. We hope to get a bigger share of the banking and insurance markets in Vietnam. Life is difficult, but that does not deflect us from the fact that, in our opinion, Vietnam remains one of the most interesting emerging markets in the Asia-Pacific region.

 

That is the picture for the mid and long-term operations of HSBC in Vietnam. This year, with many changes in government policies regarding the banking operations in Vietnam, what difficulties will your bank face in 2009?

 

We are not changing the number of people we have in our business here or reduce the amount of branches and transaction offices that we planned to open in 2009, as long as we get enough approval from the authority. Of course, we are going to look at new lending carefully. But again, I think our balance-sheet will be bigger in Vietnam at the end of 2009 than it will be at the beginning.

 

We take into account what is happening in certain sectors, obviously the export sector where we have a big position. The import-export business for us is very important, dealing with both Vietnamese and multinational companies here. As we have always done, we will continue to be selective. Clearly in the current environment, we probably put in a little added scrutiny on certain new business that we do. But we are confident that we will continue to grow here with the good customers that we have.

 

HSBC now holds a 20 per cent stake in Techcombank. Do you have any plans to buy shares of other local banks this year?

 

We have no plan to buy any other local banks. We have a very good business under our own branches of HSBC and also an interesting 20 per cent stake in what we believe to be one of the leading joint stock banks in Vietnam. We also have a stake what we hope to be able to increase in the leading insurance corporation, Bao Viet in Vietnam. With those stable businesses, I think we are well positioned. The cooperation that we get between the three is increasing and that is something we do like to see.

 

HSBC has also benefited from the government’s stimulus package. What do you think about the package?

 

In my view, it is a big stimulus package in relative terms. In terms of gross domestic product (GDP) percentage, it is one of the biggest packages in Asia. That is, therefore, very encouraging. I think if it is targeted and delivered to the export sector, it will help. Other actions taken by the authority such as the control of inflation, the reduction of bank’s reserve requirement and the easing of interest rate cap also added in much needed support to the economy in this challenging period.

 

What policies are you expecting from the Vietnamese government to make the local business environment more favourable for businesses?

 

When we look at the macro picture including the population, the increasing GDP per capita and the country’s ability to grow, we see Vietnam as really one of our interesting markets in the world.

 

The current difficulties in the global economies will provide many challenges. We certainly urge the government to continue its reform of the financial sector and to stay firmly on the path of economic development by fostering policies that will make Vietnam an attractive and rewarding place for foreign institutions to do business and that give fair reward for their shareholders.

 

The simple fact is, that for a major foreign investor, there are many competing demands on increasingly scarce capital. HSBC has certainly voted with its wallet, not only through continued investment in its own HSBC franchise here, but also via our shareholdings in two of Vietnam’s leading financial institutions, Techcombank and Bao Viet.



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