With positive prospect, the bank stocks which used to be considered as “king stocks” are gaining attractiveness in the eyes of domestic and international investors. This is the reason why the remaining foreign ownership at banks has been hunted.
Under the regulation at Decree 01/2014/ND-CP, the ownership rate of a strategic shareholder shall not exceed 20 percent of the charter capital of a Vietnamese credit institution (CI), and the total ownership rate of all foreign investors at a domestic CI shall not exceed 30 percent. Many Vietnamese banks have sold stake to foreign investors, but some others have not or have said farewell to foreign partners.
In fact, when the Vietnamese banking sector began the restructuring process, the “king stocks” did not drawn attention of foreign investors. However, in the last months of 2017 and early 2018, Hochiminh city Development Commercial Joint Stock Bank (HDBank), Vietnam Prosperity Commercial Joint Stock Bank (VPBank), and Vietnam Technological Commercial Joint Stock Bank (Techcombank) have offered shares to international organisations and earned hundreds of millions of USD, and the registered volume was even several times larger than offering. This shows that international investors are appreciating the optimistic outlook of the banking group, after a long difficult period of restructuring.
Recently, the Board of directors (BOD) of Orient Commercial Joint Stock Bank (OCB) has approved the foreign ownership limit of 23.66 percent. Previously, in early 2018, its foreign partner BNP Paribas fully divested 18.68 percent ownership at the bank via the sale of over 74 million shares, after 10 years of investment.
The withdrawal of BNP Paribas from OCB was fairly unexpected for the market, especially when many foreign investors tend to jump into the banking sector of Vietnam as at the present time. According to the latest announcement of OCB, the current foreign ownership rate at the bank is 4.98 percent of charter capital.
Meanwhile, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) is offering the entire OCB shares to divest under the roadmap specified in Circular 36. Specifically, the Hanoi Stock Exchange (HNX) has announced that VCB will continue to auction over 6.6 million shares of OCB on April 14th at 13,000 dong per share. This is the shares unsold in the total 18.9 million OCB shares that VCB auctioned on December 2017. Thus, the opportunity for foreign investors at OCB is very large.
Leader of Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) also said that the bank has locked the ownership limit for foreign investors at 25 percent. This means that the bank will use the 25 percent room to choose reputable foreign strategic investors who are prestigious, and having financially capability and long-term commitment with the bank’s future development.
In particular, the LienVietPostBank targets organisations having experience and practical capacity in cooperation, in order to promote the bank to quickly succeed in the 4.0 Technology revolution and development of digital banking, bringing LienVietPostBank to the top leading modern banks.
Currently, the foreign ownership limit of Vietnam International Commercial Joint Stock Bank (VIB) is 20.5 percent because the bank already has a foreign strategic shareholder Commonwealth Bank of Australia who is holding 20 percent of VIB stake. With limited room left, the opportunity for foreign investors to buy shares of VIB is fairly low.
For VPBank, the bank has finalised the foreign ownership limit at 22.378 percent. Meanwhile, after the withdrawal of HSBC, Techcombank has announced the investment worth over 370 million USD (equivalent to about 8.4 trillion dong) from two independent investors managed by Warburg Pincus.
The investment from new investors is part of the efforts to increase capital from now until June 2018 of Techcombank, in line with the plan approved by the bank’s shareholders committee on March 3rd 2018.
It can be said that after a long time since entering the restructuring in 2008, the banking sector has now witnessed the initial public offerings (IPOs) worth hundreds of millions USD.
Previously, in late 2017, HDBank mobilised 300 million USD from international organisations, after selling share to existing shareholders under book building method. This 6.8 trillion dong deal is the second largest investment of the banking sector, after the capital call worth 460 million USD of Vietcombank in 2007 with registering volume being three times larger than offering.
Investors participating in the offering of HDBank were all major financial institutions on the international market such as Credit Saison (Japan); Deutsche Bank AG (Germany); JPMorgan Vietnam Opportunities Fund, CAM Bank (Japan); Charlemagne (UK); Dragon Capital, VinaCapital, Macquarie Bank (Australia); or PYN Elit (Finland).
The story about calling for foreign capital is the returning sign of the banking sector in the race for increasing capital to meet the Basel II standards, because even the four largest banks of the market are struggling in raising Tier-1 capital. The number of banks that have not sold shares to foreign investors is low, mainly including banks in restructuring process, such as Saigon Commercial Joint Stock Bank (SCB), Bac A Commercial Joint Stock Bank (BacABank), Viet A Commercial Joint Stock Bank (VietABank), and Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank).
In addition, many commercial banks have repeatedly expressed the desire to expand room for foreign investors in order to increase capital, settle bad debts, and accelerate the restructuring process. general director of SCB Vo Tan Hoang Van said that after promoting the restructuring, the bank has planned to call for more foreign capital at a ratio of over 50 percent and been approved in principle. Currently, SCB is in negotiation process with foreign investors.
According to Van, many foreign investors want to join SCB, but it takes time to find investors having common business strategy and the goal to promote the bank’s development.
Regarding the issue of attracting foreign investors, Governor of the State Bank of Vietnam (SBV) Le Minh Hung said that the banking sector would want to participate more actively in the restructuring process with domestic banks. He believed that this stage will bring more opportunities for investors.
With the current regulations, many banks have reached the ceiling limits on foreign ownership rate, and repeatedly asked to increase the limits. State-owned banks have proposed to increase foreign ownership room to 35-40 percent, while small commercial banks are expecting to increase it to 49-51 percent. Meanwhile, foreign organisations have also proposed to increase the foreign ownership limit at domestic banks to 50 percent, and even 65 percent.
