Vietnamese banks draw foreign capital

No longer hot on the stock market, yet banking sector remains one of the priorities of foreign investors, with foreign ownership rate in many banks reaching the cap of 30% as regulated.

According to regulations, the share ownership rate of a foreign strategic investor must not exceed 20% of the charter capital of a Vietnamese credit institution. Meanwhile, the cap for the ownership of all foreign investors in a domestic credit institution is 30%. Therefore, many foreign investors always eye stocks of potential banks.

According to the Vietnam Securities Depository, there are up to 16 banks with foreign ownership rates of over 15%, including some that have reached or are close to the cap, such as the Asia Commercial Joint Stock Bank (ACB), the Maritime Commercial Joint Stock Bank (MSB), the Tien Phong Commercial Joint Stock Bank (TPBank), and the Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank).

Sacombank, in particular, is nearing the cap of 30%. Recently, VPBank signed an agreement to issue a private placement of 15% of its charter capital to Sumitomo Mitsui Banking Corporation (SMBC) - Japan, bringing in 35.9 trillion VND (1.56 billion USD) in Tier 1 capital and raising its total equity to around 140 trillion VND. It has been a record-breaking deal in the financial sector in Vietnam to date. SMBC CEO Jun Ohta commented that despite the current global uncertainties, investors still have faith in Vietnam's development.

There are still many banks that have room for foreign investors, such as the Vietnam International Commercial Joint Stock Bank (VIB), the Orient Commercial Joint Stock Bank (OCB), the Vietnam Technological and Commercial Joint Stock Bank (Techcombank), and the Military Commercial Joint Stock Bank (MB Bank).

VIB plans to increase foreign ownership to 30% this year. Meanwhile, the OCB plans to offer 70 million shares to domestic and foreign investors. In case foreign investors show interest in purchasing OCB’s shares issued privately, it will propose lifting its foreign ownership cap to a maximum of 30%.

Secretary General of the Vietnam Banks’ Association (VNBA) Nguyen Quoc Hung said raising the foreign ownership cap is necessary as it has brought positive changes in finance, technology and management.

Under a new proposal by the State Bank of Vietnam (SBV), mandatory transfer-receiving credit institutions may have their foreign ownership limit  raised to 49%.

Recently, credit rating agency Moody's upgraded the issuer rating and long-term local and foreign currency deposit ratings of eight Vietnamese banks by one notch, as well as one notch in partner risk ratings in local and foreign currency and partner risk assessment for seven banks.

Moody's said this upgrade reflects the increasing economic strength of Vietnam compared to other countries in the same group, as well as improved resilience to external shocks and more effective policies. Moreover, Vietnamese banks will attract investment and cooperation from international financial institutions.

Masataka Sam Yoshida, Global Director of the Cross-Border M&A Services at Japan’s RECOF Corporation, affirmed that Vietnam's strong economic fundamentals will continue to drive M&A activities this year. Investors interested in the Vietnamese market aim to penetrate and expand their long-term presence there rather than targeting cheap assets./.