Capital thirsty firms hunting for solutions

VIR’s Duong Kieu talks to Credit Agricole Corporate & Investment Bank (CACIB) Vietnam senior country manager Guy Nguyen Nhon following its recent commitments to offer funds to a large number of projects in the country.

Guy Nguyen Nhon

CACIB  has plans to finance some 40 projects in Vietnam, worth about $8.4 billion in the near future. What kind of projects are you interested in?

We select projects that have a strategic importance for Vietnam and display a profitability profile consistent with repayment requirements. We are active in various industries such as power generation and transmission, coal and mineral mining, oil and gas, telecommunications, airlines, infrastructure, paper, cement and other manufacturing industries.

For now, we are following up with 40 projects, some of them are under discussion with developers, some others are close to being finalised. We expect the number of projects in line with our selection policy to increase in the next three years, as the economy will keep growing steadily.

Phu Yen province’s Ca Pass tunnel is one of the latest projects that CACIB has financially supported.  How long has this project been going?

We are of the view that this is a good project for Vietnam. National Highway 1A is a key highway linking the north and south of the country. The current road is largely insufficient for the traffic and the number of accidents at the Ca Pass location is quite worrying. This project is strategic for the country, not only in order to ensure the sustainable development of transportation but also to address a serious security issue, i.e. traveling from Phu Yen to Khanh Hoa province will be safer and quicker.

Along with another French bank, CACIB co-signed several months ago an memorandum of understanding amounting to more than $500 million. As usual, the schedule of fund injections will be determined according to payments due to suppliers, hence we cannot indicate in advance the details relative to the timing. Also, we are prepared for the long repayment profile of this infrastructure project, for which the support of the central government is of prime importance.

How has CACIB been performing since its name change from Calyon in April, 2010?

Many projects have been knocked sideways by capital shortages

The new brand CACIB reflects the Credit Agricole Group’s commitment to bringing all its business lines together under the Credit Agricole banner. It confirms in particular the group’s dedication in the area of corporate finance and investment banking. This brand change also conveys the message that our ultimate purpose is to serve clients and contribute to the growth of the real economy.

The bank started to operate at the beginning of the 20th century, providing loans only to French farmers. Today, we are active in more than 50 countries and agriculture represents less than 5 per cent of our revenues. While Credit Agricole Group now ranks number six in the world in terms of total assets and number nine in terms of Tier 1 capital, our corporate values remain founded on solidarity and social responsibility.

Therefore, in the area of corporate and investment banking, we want to build our development as an actor in the real economy rather than a pure player in financial markets. We favour common sense to serve clients and whenever our expertise designs sophisticated products, they are only custom-made solutions to our clients’ needs.

Since the name change, our business performance has continued to grow in line with the group’s strategy and our business plan for Vietnam. We focus on multinational companies, large domestic corporate and top tier financial institutions, with the ambition to be recognised for our ability to deliver tailor-made services in the area of corporate and investment banking.

What are CACIB’s comments on the current credit services for corporate clients and your strengths over other foreign banks in Vietnam?

Currently, most credit services are vanilla corporate loan products, with tenors that are not long enough to match with the cash flow profile of some projects. A few large corporations in Vietnam are increasingly using structured financing, which can operate under long tenors. This is definitely a positive trend, even though the workload for the borrower is heavier than in the case of a basic corporate loan.

In general, the financial management at large companies will gain efficiency by using limited or without-recourse financings. In this area, CACIB has built up a long dated expertise which enables us to provide credit services of high value for our clients.

For example, we are proud to be awarded by Thomson Reuters as  “No. 1 International Bank for Project Finance in 2009”, and by Project Finance International as “Global Bank of the year 2009”. I am of the view that each bank has its own strengths and different strategies can lead to success. With regard to CACIB in Vietnam, we rely on the financial capacities and the multi-expertise of our group to provide our clients a complete range of banking services.

Bank loan scarcity for Vietnamese enterprises, especially for small- and medium-sized enterprises (SMEs) has been popular recently in Vietnam. What is your advice for them to better access bank loans in the future?

Everywhere and not only in Vietnam, SMEs more than large corporations, have to provide evidence of their repayment capabilities. The consistency of the business plan and the ability to elaborate budgets and cash flow projections are among the key elements that any banker needs to see.

Many borrowers tend to elaborate on their needs and highlight their strengths, but minimising their potential weaknesses is not a good strategy. As most banks have experienced credit analysts who will seek the hidden risks, it is actually much more convincing to openly review them and expose the corresponding action plans.