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HSBC sounds the retreat from Vietnamese finance group   2012-07-20 - C. V

The London based Hong Kong and Shanghai Banking Corporation (HSBC) reportedly plans to sell the shares it is holding of Vietnamese Bao Viet, a big insurance group, in an effort to gather its strength to deal with the financial problems and the possible heavy penalty in a money laundering lawsuit.

HSBC conducted negotiations with Bao Viet about the roadmap to increase its ownership ratio in Bao Viet to 25 percent.

The board of directors of HSBC on July 17 shook the international financial market by admitting before the US Senate that the banking group allowed Mexican drug cartels to launder billions of dollars through its US operations.

Reuters has quoted its sources as reporting that HSBC may face a fine of up to one billion dollars for this. It also quoted Mike Trippitt, an analyst of Oriel securities firm as saying that one billion dollars is equal to five percent of the expected pretax profit of HSBC in 2012, and that the penalty would seriously affect the financial situation of the banking group.

Foreign newspapers have reported that HSBC, in an effort to reshuffle itself and confront with the penalty and the financial problems, is planning to sell the stakes of Bao Viet finance group, which has 130 branches, at 400 million dollars.

According to Dat Viet newspaper, HSBC became the strategic shareholder of Bao Viet in mid September 2007 after it bought 10 percent of the stakes of the finance group at 225 million dollars. An agreement was signed at that time, under which HSBC would hold Bao Viet shares for five years at least.

As such, HSBC offers to sell Bao Viet stakes two months before the day it can withdraw capital from Bao Viet.

After Bao Viet listed its shares on the HCM City Stock Exchange in 2009, HSBC purchased more Bao Viet’s shares, raising its ownership ratio in Bao Viet to 18 percent.

Reuters has reported that HSBC is negotiating with Japanese Sumitomo Life on the sale of the 18 percent of Bao Viet’s stakes.

Bao Viet shares are trading at 43,000 dong per share, which means that the total shares HSBC is holding is valued at 250 million dollars. However, HSBC believes that it can sell the stakes at a higher price thanks to the good reputation of Bao Viet and the possibility of increasing the foreign ownership ratio in Bao Viet in the future.

Meanwhile, both Bao Viet and HSBC Vietnam refused to make comments on “the rumors on the market”.

In the statements made before, HSBC always affirmed its commitments to make long term investment in Vietnam.

VnExpress has recalled the fact that in 2009, HSBC bought more shares to increase its ownership ratio in Bao Viet to 18 percent. In 2011, HSBC sent one more its representative Charles Gregory to the Board of Directors of Bao Viet. Meanwhile, another representative of HSBC – David Fried - has been working as a member of the board of directors of Bao Viet already.

The strategy by HSBC to make heavy investment in Vietnam was once again affirmed in 2011, when David Fried said at the annual shareholder’s meeting of Bao Viet that HSBC was conducting negotiations with Bao Viet about the roadmap to increase its ownership ratio in Bao Viet to 25 percent.

Mr. David Fried affirmed that HSBC has been satisfactory with the results of the investment deals in Vietnam.

Under the Prime Minister’s Decision No. 310/2005 on the equitization of Bao Viet, foreign investors are allowed to hold no more than 30 percent of the total shares of Bao Viet.

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