Credit Suisse in Vietnam Erik Gracey, Brittany Culver, Jo- Petter Iversen
Credit Suisse in Vietnam
Erik Gracey, Brittany Culver, Jo-Petter Iversen
1945B. 1945 1954 1975 1976 1986
Struggle with French Colonialism
Independence DemocraticRepublic ofVietnam
Communist forces of Ho Chi Minh force French out.
Southernresistancecrumbles,ending a 30-year war
South officially integrated with the North under communist rule.
CPV implemented free market reforms known as Doi Moi
Acceptance to WTO
2007
Brief History
StatisticsGDP (purchasing power parity) $262.5 billion
GDP (official exchange rate): $48.43 billion
GDP - real growth rate 8.20%
GDP - per capita (PPP) $3,100
GDP - composition by sector
agriculture: 20.10%
industry: 41.8%
services: 38.1%
Labor force: 44.58 million
Unemployment rate 2%
Population below poverty line 19.50%
Household income or consumption by percentage share
lowest 10%: 2.9%
highest 10%: 28.9%
Inflation rate (consumer prices): 7.50%
Investment (gross fixed): 32.3% of GDP
31 3234
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6.79 6.897.1 7
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2000 2001 2002 2003 2004 2005 2006
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GDP GDP %Growth
GDP growth
PDI, 70
IDV, 20
MAS, 40
UAI, 30
LTO, 80
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PDI IDV MAS UAI LTO
5D model by Geert Hofstede
Economic Sectors
Service, 38.10%
Industry, 41.80%
Agriculture 20.10% Agriculture
Industry
Service
Economic Reforms
• Initiated by Sixth National Congress of the ruling CPV.
• Problems: Shortage of food, inflation and deteriorating living standards
• Reforms enacted to shift priority from heavy industry to: food production, consumer goods and production of export goods
• Reduce state interference
• Separated central state bank and commercial banks and thus opening the way for private banking
• Moved from state monopoly to free trade and export based policies.
• WTO membership in 2007
– Shield against duties on garment exports, totaling $3 Billion last year.
– Benefit from fact that investors are afraid of investing in china.
Doi Moi Reforms (1986)
SWOT AnalysisStrengths
•Credit Suisse: A global company with a global strategy
•Emerging Market Commitment
•Capital Fund: $6.7 billion
•Established Presence in Vietnam: Credit Suisse as a consultant and a creditor
•Brand Name (Awards: Next Slide)
SWOT AnalysisBanking Awards (2007)
» -Global Investment Bank of the Year -Best Leveraged Finance House -Best High Yield Bond House
-Best Leveraged Finance House
-Best Emerging Markets Debt House -Best Investment Bank in Vietnam
1.
2.
3. -Best Foreign Investment Bank in Indonesia
4. -Best Equity Underwriter
-Best Debt Underwriter -Best Long-Term Partner
-Best Overall Investment Bank
SWOT ANALYSIS
• Declining net interest margins • Weak Performance in Asset Management• This will be addressed in our product mix• Poor Publicity• Enron scandal
Weaknesses
SWOT ANALYSISOpportunities
Ho Chi Minh Stock Exchange (3y)
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2005 April J ul Oct 2006 Apr Jul Oct 2007 Apr Jul Oct
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SWOT ANALYSISOpportunities
Equitization of Vietnamese SOEs
No. of SOEs5000
No. of Equitized SOEs
1457
Planned Equitizations
2053
Average ROE7-11%
Credit Suisse ROE
>20%
SWOT ANALYSIS
• Consumer Demand: High Risk/High Reward
• Ernst & Young Survey
• Record Equity Flows
Opportunities
SWOT ANALYSIS
1. ANZ Bank
Headquarted in Australia. They offer corporate banking, trade finance, leasing, personal, and electronic banking. ANZ has been in Vietnam since 1993, they entered following the Doi Moi reforms.
2. Citigroup
Currency transactions, cash management, trade services, short-medium-long term loans, hedging, trade, and project finance. Once again, not very specific, definitely a global bank, offering a great variety of financial and banking services.
3. Deutsche Bank
Entered Vietnam in 1992. Offer a full range of investment services including: sales and trading in asset classes such as foreign exchange, fixed income, and money markets
Threats
SWOT ANALYSIS
Political Risk
• CPV (Communist Party of Vietnam)
• Centralized control
Legal Risk
• Judiciary system
• Implications for management
Basel 2 Accords
• Implications for management
Environmental Risk
• External: Poor banking industry performance forecasts 2006/2011
• Interest rate volatility
• Internal: Monsoons, typhoons, and tropical disease
Threats
Product
• Investment Banking Services– Equitization Strategy– Debt & Equity Underwriting– Investment Research– Merger & Acquisition
• Asset Management– Vietnam Funds– Alternative Investments (Real Estate, Private Equity and
Volatility Management)– Portfolio Management-specifically Mutual Funds
Differentiation
• Why Credit Suisse?– While our many competitors offer a broad range of services to
“blanket” the market, Credit Suisse has adapted its product range to include services specifically suited to the current environment in Vietnam.
– Less Costs– Specialization
Market Entry
Synergies
-SCIC Underperforming
-Equitization of 5,000 SOEs is a large task
-Goal Compatibility (Both seeking partners)
-Promoting Investment in Vietnam
Deal or No Deal
-Try for a 20% stake, twice as much as ANZ.
-Negotiation Strategy
-Patience is a virtue
-Financial Structure
State Capital Investment Corporation
Cost Forecast
Cost Budget (3 yrs)
Start-Up $130.08
Contributed Capital$54,000,000
Licenses $2,010.12
Property $20,000,214
Wages $6,500,000
Energy $110,000
Cost of Revenue15% of revenues
Total ~$100,000,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
3 year Time-Line
2008
Strategic planning
Market research
External contacts
Financial planning
Registering property
Startupprocedures
LicensesNego-tiation
Partner-ship
Q.1 Q.2 Q.3 Q.4 Q.1 Q.2 Q.3 Q.4
2009 2010
Construction
Training of personnel
Utilities
Business Operations