On March 9, Korean media reported that Hana Financial Group plans to expand its operation in Vietnam by becoming the strategic shareholder of the Bank for Investment and Development of Vietnam (BIDV) one of the four biggest banks in Vietnam now. Reportedly, in August 2017, BIDV signed an agreement with KEB Hana Bank and the content of this agreement was not announced.
At the beginning of 2018, Chair of KEB Hana Bank Kim Jung Tai met deputy prime minister Vuong Dinh Hue.
As a result, BIDV’s strategic shareholder from Korea was officially informed. Accordingly, BIDV will issue shares to its Korean counterparts to raise capital, thereby improving its capital adequacy ratio which is approaching the limit.
Vietcombank is also planning to sell more than 350 million shares (equivalent to 10 percent stake) to foreign investors in the first six months of 2018 through separate issuance or public auction after being approved by the government.
Nghiem Xuan Thanh, Chair of Vietcombank, said that GIC Private Limited, formerly known as government of Singapore Investment Corporation, is still one of the potential investors and the existing partner Mizuho (Japan), who is holding 15 percent stake of Vietcombank, will be will be allowed to buy more shares in this bank.
On March 12, Techcombank announced an investment of over $370 million from two independent legal investors managed by Warburg Pincus LLC. Thus, after HSBC’s withdrawal of 20 percent stake from Techcombank in July 2014, the new investment is part of Techcombank’s capital increase efforts following the plan approved by the annual general meeting (AGM) on March 3, 2018.
Pincus is the world leading fund in investing in companies with long-term growth potential, holding and managing assets worth more than $44 billion shares of unlisted companies worldwide, in which Vietnam market alone was more than $1 billion.
deputy prime minister Vuong Dinh Hue had a meeting with leaders of Jardines Matheson group and suggested that they can participate in the restructuring process of state-owned enterprises (SOEs) and credit organisations in Vietnam. Earlier, the auction sessions of HDBank, VPBank attracted a large amount of capital of foreign investors.
Recently, Tien Phong Joint Stock Commercial Bank (TPBank) and PYN Fund Management signed a share purchase agreement. Accordingly, PYN Elite Fund will own TPBank’s 4.99 percent stake after issuance with the value of nearly $40 million.
Banks’ operations in 2017 marked a dramatic turnaround when as many banks not only recovered their high profits like before but achieved new records, the bad debt settlement process was faster after having a series of support policies from the State.
The long-term growth potential of the banking sector is also becoming increasingly attractive as monetary policy continues to be loosened with the aim of attaining high credit growth and keeping interest rates stable. Meanwhile, sources of service income have been increasing sharply in response to increasing demand for financial services from businesses and the people.
Retail segment with high profit margin is expected to continue developing strongly, in which, not only join stock commercial banks but wholesale banks such as Vietcombank or BIDV have recently involved in. For example, as in Vietcombank, if retail credit in 2016 accounted for 33.1 percent of the total outstanding loans, then in 2017, it reached 40.8 percent, and was willing to exceed 50 percent in 2018.
In 2018, banks continue to set strong growth plan. For example, Vietcombank plans to achieve 13 trillion dong profit, up 15 percent while Techcombank plans to attain the pre-tax profit of 10 trillion dong, up 24 percent from 2017.
It is noteworthy that financial institutions involving in Vietnam market now not only serve more than 90 million Vietnamese people but also have chance to target at 600 million Southeast Asian people when the Asian Economic Community (AEC) was established since December 31, 2015.
Meanwhile, Vietnam stock market in general and share price of banks in particular have increased very strongly over the last period. Since the beginning of this year, if VN Index improved 15.2 percent, the banking sector nearly doubled from the growth rate of 28.2 percent. However, the P/E of the banking sector was still equal to that of VN Index at 20.6 percent. Therefore, if not investing soon, it is more likely to have to purchase bank shares at high price then, especially if Vietnam market is upgraded soon.
With the continuous drop in government bond yields plus the upgrading of credit rating, the banking sector’s evaluation will continue increasing, along with the expectation that room for foreign investors will soon be expanded. The banking sector is likely to continue being given priority to support the capital increase to meet new safety standards when Basel 2 took effect since 2020.
