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

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GDP growth

PDI, 70

IDV, 20

MAS, 40

UAI, 30

LTO, 80

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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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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