In recent years, many Vietnamese banks have chosen large foreign financial institutions as strategic shareholders.
National Citizen Bank (NCB) is also taking steps to find a strategic investor to motivate the bank’s operations. However, it will not pick any strategic shareholder at all costs; it is looking for a trustworthy partner.
Solve the ‘thirst of capital’ of domestic banks
The trend of ‘seeking foreign capital’ has been actively implemented by Vietnamese banks for a long time, especially in the period of 20052011. It started with the three deals in 2005 between Asia Joint Stock Commercial Bank (ACB) and Standard Chartered, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) and HSBC, and Saigon Thuong Tin Joint Stock Commercial Bank (Sacombank) and ANZ.
Driven by the expansion of the financial system, the bank market at that time attracted foreign partners. The cooperative relationship, in addition to business benefits when participating more deeply in administration, also helps foreign partners indirectly learn about the Vietnamese financial system, placing the first bricks to penetrate into this new financial market with many attractive segments.
Subsequently, in 2006, Vietnam Prosperity Joint Stock Commercial Bank (VPBank) started cooperating with Overseas Chinese Banking Corporation Limited (OCBC). In 2007, Vietnam Joint Stock Export Import Bank (Eximbank) sold 15 percent of its shares to Sumitomo Mitsui. Then, in turn, Orient Joint Stock Commercial Bank (OCB), An Binh Joint Stock Commercial Bank (AnBinh Bank), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Southeast Asia Joint Stock Commercial Bank (Seabank), Vietnam International Joint Stock Commercial Bank (VIB), and finally Vietnam Joint Stock Commercial Bank of Industry and Trade (Vietinbank) found satisfactory foreign partners. Trillions of dong from these deals added resources to the domestic banking sector, helping to push up the charter capital of the banking system, and create resources for promoting business activities.
According to experts, up to now, foreign capital inflows have always been necessary for the banking system, which comprises of large-scale institutions with limited mobilisation from domestic investors. Especially in the period of shifting to higher management standards, such as Basel II, this can be an indispensable motivation to solve the “thirst for capital” of Vietnamese credit institutions.
Until now, many foreign partners have broken up with Vietnamese banks. The farewell of foreign shareholders was probably caused by their short-term strategic investment. Investment in banks must be long-term and most importantly, investors and invested banks must share a strategic vision for stable long-term development. Different from the massive collaboration of 10 years ago, domestic banks, whose size and stature is far developed compared to the previous period, are having a lot more options. NCB is a good example.
Find a trustworthy strategic investor
As analysed above, the fact shows that the participation of foreign strategic shareholders in Vietnamese banks has created the driving force and conditions for Vietnamese banks to enhance publicity and transparency, improve operation quality, as well as affirm their stature and brand in the domestic and international market.
With the same criteria, NCB’s Board of directors determined, before deciding to seek a foreign investor as their strategic shareholder, Vietnamese banks in general and NCB in particular want to choose credible investors with financial capacity and support ability in improving management, execution, and risk management. The investors should be able to support banks in applying modern technology, developing banking products and services, and developing products in other areas in line with their development strategy.
However, according to Vu Manh Tien, NCB Standing vice Chair: ‘We do not choose a foreign investor as our strategic shareholder at all costs because the selection of foreign strategic shareholder is not only about achieving short-term goals but it must bring long-term benefits to both sides. NCB is seeking a long-term strategic investor in line with NCB’s business strategy.’
Therefore, before seeking and selecting foreign strategic shareholders, NCB has developed criteria to select a strategic shareholder in accordance with their needs and characteristics. The criteria includes total assets, international operational experience, international independent credit rating, etc. Tien shared that selecting a foreign strategic shareholder is a rather complex process, which requires the bank to find a suitable partner for long-term development and, at the same time, comply with legal regulations related to strategic shareholders.
Regarding the selection of strategic shareholders, both parties should consider how to coordinate, how to harmonise culture, and how to manage the company to look at the positive aspects of both sides and achieve the best resonance value. When selecting foreign strategic shareholders, not only NCB but all Vietnamese banks want to access a more advanced internal management system and be supported by foreign strategic shareholders to manage human resources, modernise the operation model, and manage banking activities in a modern way.
Moreover, finding a strategic partner to support NCB to develop digital banking is a very important criterion. Digital banking is a global trend. NCB has no choice other than investing and promoting digital banking to meet the demand of using modern banking products and services and quickly integrate into the global banking community.
Considering this issue, Dr Le Xuan Nghia, former vice Chair of the National Financial Supervisory Committee, a member of the Economic Advisory Board for the prime minister, said: ‘To attract strategic investors in the coming years, NCB’s Board of directors should carry out the plan to bring NCB into the middle-class banks through increasing charter capital and total assets in the next five years. The investors should not only able to support capital, but also act as a partner, a companion in building this bank to become one of Vietnam’s pioneering banks to expand to the Southeast Asian and global financial market.’
