German bank stick to wholesale prospects

Germany’s HSH Nordbank, a merger of the Hamburgische Landesbank and the Landesbank Schleswig–Holstein, has marked its one–year anniversary, while its predecessor, Hamburgische Landesbank’s has been operating in Vietnam for five years.
Klaus H Boritzka, the bank’s regional head in Asia and executive vice president, arrived at Hanoi on October 25 and talked about the bank’s prospects. Excerpts:
How would you summarise the bank’s performance in Vietnam?
The Hanoi office has served an as a bridge between our customers, mainly German mid–caps (trading houses), partners in Vietnam and our entire branch network. It forms a part of our Asia team together with branches in Hong Kong, Singapore and Shanghai. As the importance of foreign trade and foreign direct investment increases, and as the Vietnamese economy grows, we see many opportunities in transport and project financing.
What opportunities do you see in Vietnam and does your bank have plans for expanding its activities here in the future?
HSH Nordbank sees itself as an international product and sector specialist. The bank focuses its business activates on shipping and real estate financing, corporate clients, credit investments and funding. Our other activities include transport financing, leasing and refinancing as well as private banking. We see a potential demand in Vietnam for shipping financing, while the possibility to meet this demand from both domestic and other foreign banks remains limited. We expect it’ll take several years for us find success in this area.
What is the relationship between your bank and the Vietnamese banking system, as well as other Vietnamese authorities?
Over the past five year, we’ve established an excellent relationship with Vietnamese commercial banks and the state Bank of Vietnam. We expect this to continue, as will our contributions to the sector, such as providing training for Vietnamese bankers, as we have done in the past.
How do you view the investment climate and the banking sector in Vietnam?
Following the Asian financial crisis, Vietnam experienced a drop in foreign direct investment, so it’s made considerable efforts to improve its investment climate since. A decade of strong growth, single digit inflation, tax incentives, and liberalisation make Vietnam attractive to foreign investors. Vietnam’s financial sector is still in the early development stage. Much needs to be done to bring it up to international standards. We’re optimistic that Vietnam’s financial reform are on track.
Recently we’ve witnessed many changes to the Vietnamese banking sector. Measures have been taken to improve the legal framework, strengthen regulation and supervision. Liberalisation of interest and foreign exchange regulations have created a better environment for trade and investment. I believe that if Vietnam’s banks are playing field, then the whole sector will emerge stronger, proving itself capable of facing the challenges ahead, including the accession to WTO and the US-Vietnam Bilateral Trade Agreement. Equitisation of state-owned banks is of special interest to us, as this would considerably alter the Vietnamese banking sector.
I understand the German government is going to abolish its guarantee over obligations of the Landesbanks network after longer benefit from State guarantees. What challenges do you expect and how will you deal with them?
We are going to feel the loss of state guarantees on our risk profiles, earnings, capital strengths and funding. The absence of explicit guarantees will bring challenges in the form of our rating agencies, which has already dropped.
The merger has been one way to deal with the situation because it could represent the growth of our international network, make our presence in Asia stronger and give us more market power. After the merger, we worked out a strategy to adapt to the new situation. We no longer rely on relatively cheap funding with high rating, so we’ll investigate what we’re good at, where we have franchise value, and we found that our strength is in the northern German market as a commercial bank for regional clients, especially for mid–cap clients. When it comes to mid-sized clients (ie: 5–6,000 employees and annual turnover of 500 million euro) we want to become the number one in the region.

 

Category: Finance