Banks seek to attract foreign capital

HDBank is allocating 10% of its foreign investor quota to international investors. Photo: Internet

During the investor conference in February 2024, organized by HDBank, a spokesperson for the bank stated that the approval of the strategy to establish a representative office in Seoul (South Korea) is integral to the bank's efforts to broaden international ties with financial institutions, corporations, and overseas businesses. Additionally, HDBank has garnered interest from several foreign entities recently. Thus, HDBank has "reserved" 10% of its foreign ownership limit  for international investors, and plans to issue shares to raise capital when the conditions are optimal and the right partners are identified.

In a similar vein, soon after the listing of Nam A Bank's NAB shares on the HoSE, Mr. Tran Ngoc Tam, Vice Chairman of the Board and General Director of Nam A Bank, shared with the media that the bank's objective is to boost its capital to 13,000 billion VND in 2024 via stock dividends, aiming for a charter capital target of approximately 16,200 billion VND by 2025. To achieve this, Nam A Bank is engaging in discussions with foreign strategic partners to identify suitable investors. Nam A Bank intends to utilize the full 20% foreign ownership limit  to attract additional foreign investment.

Prior to the annual general meeting (AGM) this April, several banks have begun to outline their plans to issue shares to foreign investors. For instance, LPBank is proceeding with steps to offer 300 million shares to international investors in a private placement. In 2023, LPBank shareholders endorsed a proposal to increase capital by up to 11,385 billion VND through four mechanisms, including a private placement for foreign investors.

Vietcombank is also preparing to privately offer 307.6 million shares to its existing foreign strategic partner, Mizuho Bank (46.1 million shares), and other investors (261.4 million shares). Initially proposed by Vietcombank in 2019, the plan to privately offer 6.5% of its shares has yet to be fulfilled due to challenging macroeconomic circumstances. At the 2023 AGM, Vietcombank's management confirmed the continuation of this plan, with the bank engaging financial advisors to facilitate the selection of foreign shareholders, aiming for completion within the 2023-2024 timeframe.

MB's most recent annual report reveals that the bank presently has 580 foreign shareholders, holding a total of 2.5 million shares, equating to 0.06% of the charter capital. Although foreign investors are permitted to own up to 23.23% of MB's capital, the bank's executives have announced plans to seek appropriate strategic investors for a private offering of around 60 million shares.

While BIDV has not disclosed its foreign capital offering plan for this year, in 2023, it aimed to raise capital by issuing an additional 455 million shares through either a public or private offering. However, the bank's AGM resolved to postpone this capital increase plan until 2024.

Experts note that the banking and finance sectors consistently attract foreign investment interest. Indeed, numerous successful transactions involving Korean and Japanese investors, among others, with local banks have been recorded.

Associate Professor Dr. Nguyen Huu Huan, Head of the Financial Market Department (Ho Chi Minh City University of Economics), remarked that the involvement of foreign strategic investors not only bolsters banks' financial resources but also supports technological advancements, governance improvements, and compliance with international standards.

According to VNDirect Securities Company, the capital adequacy ratio (CAR) of Vietnamese banks has seen improvement; however, the capital "buffer" remains relatively low by international standards. Consequently, augmenting capital and seeking foreign investment are essential steps towards fulfilling the bank restructuring agenda and adhering to international governance norms such as Basel II, Basel III.

Nevertheless, the pursuit by numerous banks to sell equity to foreign investors in 2024 encounters challenges, particularly due to the adverse effects of the global capital market slowdown, a result of monetary tightening policies. Moreover, Mr. Dominic Scriven, founder and CEO of Dragon Capital, identified the restriction on foreign ownership in Vietnamese banks as a significant obstacle for foreign investors. Current regulations limit  foreign ownership to a maximum of 30% of the charter capital of a joint-stock commercial bank in Vietnam, with exceptions in certain cases.

Although calls for expanding foreign ownership limit s for banks have been made, the State Bank has maintained that such measures should be reserved for financially weak institutions. Given that 27 of the 31 commercial banks listed on the stock exchange fall into this category, a significant economic disruption domestically or globally could lead to rapid capital withdrawal by foreign investors, thereby complicating economic management and monetary policy execution.