ANZ: profits to be found off the beaten track

9th June 2006
By Emily Tonkin

ANZ is to take a 40% share in a Vietnamese credit card venture with local lender Sacombank.

ANZ has announced a credit card joint venture with Sacombank in Vietnam, a market that is expected to undergo significant growth in the medium term. Given Vietnam's encouraging economic projections and the very small proportion of the population currently using banking services, this is positive strategic move by ANZ.

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One of Australia's major banks - ANZ - is to ramp up its partnership with Vietnam's Sacombank. In August 2005, ANZ paid US$27 million for a 10% stake in the Vietnamese bank. Now the Melbourne-based lender is to launch a card venture with its partner in which Sacombank will enjoy a majority holding.

The Vietnamese credit card market is expected to grow substantially in the medium term. Currently just 5% of the population utilizes banking services and there are just 100,000 credit cards in issue, which is minute considering the population of 84 million. In addition, Vietnam has experienced an average real GDP growth rate of 7.3% over the 2001-2005 period, highlighting the potential growth of the financial services market and personal wealth.

ANZ's choice of local bank is a good one, considering Sacombank is the largest private commercial bank in Vietnam by capital, and currently has a network of 109 branches and 34 ATMs. The banks have a further 19 ANZ/Sacombank co-branded ATMs. ANZ will benefit from Sacombank's local expertise and existing customer base, while Sacombank will benefit from ANZ's financial services know-how, particularly in credit cards.

This partnership is part of ANZ's strategy of investing in and aligning itself with major financial institutions in emerging markets. Other markets that have been involved in this strategy include the Philippines, India, Cambodia and Indonesia.

This strategy of focusing on developing markets, rather than following the trend of investing in China, is expected to prove highly profitable. Many of these markets are supported by China's economic boom and will experience strong growth in the financial services sector, yet have been forgotten by global players. ANZ should find itself well placed to reap the rewards of this in the medium and long term.
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