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 Credit Suisse’s reappointment as

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Registration date : 2011-01-31

PostSubject: Credit Suisse’s reappointment as   Wed Jun 22, 2011 9:05 pm

tempt to sell a stake in Vietcombank, formally the Joint Stock Bank for Foreign Trade of Vietnam, is the latest push by the government to kick-start its long-delayed part-privatisation programme, which stalled in the wake of the global financial crisis and domestic economic instability. If Vietcombank manages to complete the sale as planned, it would be one of the biggest foreign investments ever in a listed Vietnamese company.

Vietnam’s economy has grown rapidly in the last two decades as the country has moved from central planning to a freer, more market-oriented approach. Although Vietnam, a country of 87m people, has one of the fastest-expanding middle classes in Asia, only one in five people have a bank account, according to bankers’ estimates. That makes the banking sector attractive to foreign investors, if the price of entry is right.

More than 10 international banks have already acquired stakes in local lenders, including HSBC, which owns 20 per cent of Techcombank; Standard Chartered, which owns 15 per cent of Asia Commercial Bank; and Australia’s ANZ, which owns 10 per cent of Sacombank. All three of these international banks also operate their own locally incorporated banks in Vietnam. People familiar with the situation said that Credit Suisse has been sounding out possible interest in Vietcombank from significant Western and Asian banks, private equity groups and sovereign wealth funds. Indicative expressions of interest are due on May 23, the people said, in a sale process that will test the appetite of foreign investors to buy in to Vietnam’s large and often inefficient state-owned sector. At its annual meeting last month, Vietcombank said that it would sell new shares equivalent to up to 20 per cent of its enlarged share capital to foreign strategic investors as part of a drive to increase its capital and improve its competitiveness.

Vietcombank shares closed on Monday at 29,500 Vietnam dong ($1.43), giving the company a market capitalisation of 51,883bn dong. Bankers suggested that the starting point for any negotiations with foreign strategic investors would be the current market price, which is less than a third of the average price paid during Vietcombank’s initial public offering in 2007.

Credit Suisse’s reappointment as adviser to Vietcombank is a boon for the investment bank, which has been working hard to win business from state-owned companies in Vietnam. Last year, Hans-Ulrich Doerig, chairman of Credit Suisse, flew to Vietnam to sign an agreement with the ruling Communist party to train executives from state-owned companies.

However, Vietnam is plagued by corruption, red tape and a lack of financial transparency and, like other investors, Credit Suisse has not found it an easy place to do business. Last year Vinashin, a large, heavily indebted state-owned shipbuilder, failed to make the first repayment on a $600m loan arranged and backed by Credit Suisse. Talks between the troubled company and its creditors, including Credit Suisse, have dragged on since with
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