Societe Generale hedges it bets

During a visit to meet Vietnamese corporations, Societe Generale's Asia-Pacific Head of Corporate and Investment Banking De Doan Tran tells about the bank's upcoming plans for the Vietnamese market.

With your visit, it seems that Societe Generale continues to focus on project financing activities in the Vietnamese market?

In the last 10 years Societe Generale has financed 14 major industrial projects in Vietnam in a wide range of areas from power plants such as Phu My 2.2 to cement plants, paper pulp manufacturing and infrastructure projects such as bridge construction with Phu My Bridge in Ho Chi Minh City.

We have a long-term commitment to Vietnam and we would obviously accelerate our export credit and project financing activities here with focus on the energy and natural resources sectors. Of course, we only finance projects where there are win-win situations for both parties. However, as I mentioned, the Societe Generale Group is involved in different areas of excellence. Thus, we would like to expand our operations to other areas as well. In fact, we have been running consumer financing business quite well in Viet Nam.

But has Societe Generale's consumer finance business been negatively affected by the rise in interest rates?

Obviously higher market interest rates would hinder customers from using this service. However, we believe that this is just a short-term difficulty and consumer credit still has tremendous room for growth.

When the inflation pressures on the economy ease up, interest rates will fall. Also in these difficult times it is important to maintain access to credit for people. I also want to emphasize that consumer credit facilitates the acquisition of goods such as motorbikes or home appliances, and this is good for the Vietnamese economy; we do not finance speculation in real estate or in securities.

We are satisfied with the development of our consumer finance business today. Our business activities have grown accordingly with our business plan. Since kicking-off in last September, we have recruited over 300 employees.

Besides project financing and consumer financing, which services will Societe Generale bring to Viet Nam?

We would like to bring commodity hedging to the Vietnamese market. In terms of commodity hedging, we have been awarded the title of Best Commodity Derivatives Bank of the Year in Asia-Pacific for two years in a row in 2006 and 2007.

Our derivative products would allow local companies to protect themselves against the rise in commodity prices in the energy sector. We will need to work with the State Bank of Vietnam and the Ministry of Finance to make them understand the benefits as well as the risks of this product so they can allow banks like Societe Generale to provide this kind of product to selected local customers which can understand the risks and have a real need to hedge.

However, in Viet Nam, Societe Generale cannot provide this product via a representative office. Does this mean that you will apply for a licence to set up a local corporation in Viet Nam?

You are absolutely right. We cannot provide this product via our representative office. But this kind of product can be provided from our overseas branches in Singapore, Hong Kong or Paris. It should be noted that those commodities such as crude oil are traded all over the world, especially at major financial centres like Singapore and London.

Concerning the application for a banking subsidiary, it is still premature for me to be more explicit on this. But definitely, we believe that there is a lot of potential in the Vietnamese market for retail banking and we are looking at different opportunities.

In fact, foreign banks like HSBC and Standard Chartered have been waiting for a licence. Could this cool off Societe Generale's enthusiasm to set up a local entity?

No, we have a long-term commitment to the Vietnamese market and the market has great potential for growth. It should be noted that we are the second foreign institution to receive a licence from the State Bank of Viet Nam to establish a consumer finance subsidiary. We have a close working relationship with the authorities.

So, we expect no specific difficulties that cannot be overcome in the future. With a strong expertise on retail banking, Societe Generale is currently selling eight products on average to each customer in France. We are also one of the first banks to invest in Central European markets and we are now among the top 3 players in fast-growing markets like Russia, Czech Republic, Romania, Serbia and Croatia. Thus, with experiences in different markets, we hope that one day we can bring our expertise to Viet Nam and I know that Vietnamese customers would like to have more banking products. (Dau Tu)