Vietcombank started off 2019 with a stake sale to two foreign investors. More big deals are expected this year (Photo: VNA) Hanoi (VNS/VNA) - The improved business performance of Vietnamesebanks and a Government regulation to require local banks to meet strictercapital regulations as part of Basel II standards are spelling the start of awave of foreign investment into the country’s finance and banking sector in2019, experts have said.
From the beginning of this year, the market has seen positive signals on risingforeign investment in the sector.
NongHuyp Financial Group is the latest foreign investor to show an appetite forVietnamese banks after the acquisition of more than 111.1 million shares ofVietcombank by Singapore’s sovereign wealth fund GIC Private Limited and one ofJapan’s largest financial services providers Mizuho Bank Ltd at a cost of some 6.2trillion VND (265 million USD) on January 9.
During last week’s meeting with Chairman of the Vietnam Bank for Agricultureand Rural Development (Agribank) Trinh Ngoc Khanh, Kim Gwang Soo, Chairman ofNongHuyp Group, proposed to support the restructuring process of the largestVietnamese bank by assets.
Detailed proposals on the restructuring were not mentioned at the meeting butanalysts said the move would pave the way for the Republic of Korea’s fourthlargest financial institution with seven subsidiaries in banking, investmentand insurance including NongHuypbank, to become a strategic shareholder ofAgribank, which is due to have an initial public offering at the end of thisyear.
Besides Agribank, the market is also expected to see the completion of a dealbetween the Bank for Investment and Development of Vietnam (BIDV) and the Republicof Korea’s KEB Hana Bank in 2019.
Under the expected deal, the second biggest Vietnamese bank by market valuewill issue 603 million new shares in a private placement for the subsidiary ofHana Financial Group, reducing the State holding to 80.99 percent from thecurrent 95.28 percent.
The foreign strategic partner of VietinBank – Mitsubishi UFJ – is also willingto support the bank in boosting its charter capital for business facilitation,according to Kanetsugu Mike, CEO of Mitsubishi UFJ Financial Group (MUFG).
Not only major State lenders, but small-cap banks, including Nam A Bank andOCB, are also proving very appealing to foreign investors.
Nam A Bank’s General Director Tran Ngoc Tam unveiled that the bank would sellstakes to a foreign strategic partner before debuting on the stock market as ithas so far agreed on the principles of the cooperation.
Bui Quang Tin, CEO of Bizlight Business School, believes foreign capital in Vietnam’sfinance and banking sector would rise significantly this year.
“Besides efforts of the Government to call for foreign inflow to the bankingsector, improvement in business performance and asset quality of local banksalso contributes to intensifying trust of foreign investors,” Tin said.
Rebaca Tan, a Moody’s analyst, also forecasts Vietnamese banks would achievefurther improvement in profitability in 2019, again because of wider netinterest spreads and lower credit costs.
According to Moody’s, Vietnamese banks achieved a higher aggregate return onassets for a second year running, registering a rise of 1.1 percent in 2018from 0.9 percent in 2017. Aggregate net income for the banks also rose 35 percentto 70 trillion VND (3 billion USD) last year from the previous year, despite amoderation of credit growth.
Independent banking expert Nguyen Tri Hieu also foresees rising foreign capitalinflow to the country’s finance and banking market in 2019.
“Many foreign investors, especially RoK ones, are showing big interest inVietnamese banks and finance companies,” Hieu said.
He explained the market, especially consumer finance, has high growthpotential, given the country’s population of more than 95 million with only 30percent of them having access to banking services.
According to experts, while it is hard for investors to own wholly foreignowned banks in Vietnam, especially after Deputy Prime Minister Vuong Dinh Huelast August said the Government would limit or possibly stop issuing newlicences for the establishment of wholly-owned foreign banks in the country,the best option for foreign investors to enter the Vietnamese market now isthrough mergers and acquisitions (M&A) with local banks and financialfirms.
“In the current context, the most common way for foreign investors to enter theVietnamese financial market is to acquire stakes in local banks or buyfinancial companies instead of establishing new ones,” Hieu said, adding theM&A would also help reduce many legal and procedural difficulties forforeign investors.
“Therefore, instead of paying a huge amount and spending a lot of timeestablishing a new company, M&A with local partners has more advantages,especially when local banks are also expecting to have capital from foreignshareholders to meet the central bank’s Basel II standards due to theunderdevelopment of the domestic capital market,” Hieu explained.
However, to make the M&A market in the finance and banking sector moreattractive to foreign investors, he suggested the Government increase theforeign ownership limit (FOL).
The current FOL of 30 percent isn’t encouraging foreign investors as they can’tbe involved in banks’ decision-making with the holding rate,” Hieu explained.
He also recommended the Government learn from other countries, where investorsare allowed to buy a part of a local bank or finance institution, instead ofthe whole institution as currently, with an aim to speed up M&A deals.
It isn’t necessary to merge the entire institution at the same time. Forexample, a foreign investor can acquire the credit business segment of a bankand ignore the service business segment when they see the former operatingwell. Then, they can consider restructuring the institution gradually andfinally acquiring the entire institution, Hieu said.
“It is also necessary to relieve the current regulations on becoming strategic shareholdersof banks and finance companies. According to the current regulations, toqualify to become strategic investors of local institutions, foreigninstitutions must be rated well by international rating agencies with totalassets of more than 20 billion USD and charter capital of at least 1 billionUSD,” he said.-VNS/VNA
From the beginning of this year, the market has seen positive signals on risingforeign investment in the sector.
NongHuyp Financial Group is the latest foreign investor to show an appetite forVietnamese banks after the acquisition of more than 111.1 million shares ofVietcombank by Singapore’s sovereign wealth fund GIC Private Limited and one ofJapan’s largest financial services providers Mizuho Bank Ltd at a cost of some 6.2trillion VND (265 million USD) on January 9.
During last week’s meeting with Chairman of the Vietnam Bank for Agricultureand Rural Development (Agribank) Trinh Ngoc Khanh, Kim Gwang Soo, Chairman ofNongHuyp Group, proposed to support the restructuring process of the largestVietnamese bank by assets.
Detailed proposals on the restructuring were not mentioned at the meeting butanalysts said the move would pave the way for the Republic of Korea’s fourthlargest financial institution with seven subsidiaries in banking, investmentand insurance including NongHuypbank, to become a strategic shareholder ofAgribank, which is due to have an initial public offering at the end of thisyear.
Besides Agribank, the market is also expected to see the completion of a dealbetween the Bank for Investment and Development of Vietnam (BIDV) and the Republicof Korea’s KEB Hana Bank in 2019.
Under the expected deal, the second biggest Vietnamese bank by market valuewill issue 603 million new shares in a private placement for the subsidiary ofHana Financial Group, reducing the State holding to 80.99 percent from thecurrent 95.28 percent.
The foreign strategic partner of VietinBank – Mitsubishi UFJ – is also willingto support the bank in boosting its charter capital for business facilitation,according to Kanetsugu Mike, CEO of Mitsubishi UFJ Financial Group (MUFG).
Not only major State lenders, but small-cap banks, including Nam A Bank andOCB, are also proving very appealing to foreign investors.
Nam A Bank’s General Director Tran Ngoc Tam unveiled that the bank would sellstakes to a foreign strategic partner before debuting on the stock market as ithas so far agreed on the principles of the cooperation.
Bui Quang Tin, CEO of Bizlight Business School, believes foreign capital in Vietnam’sfinance and banking sector would rise significantly this year.
“Besides efforts of the Government to call for foreign inflow to the bankingsector, improvement in business performance and asset quality of local banksalso contributes to intensifying trust of foreign investors,” Tin said.
Rebaca Tan, a Moody’s analyst, also forecasts Vietnamese banks would achievefurther improvement in profitability in 2019, again because of wider netinterest spreads and lower credit costs.
According to Moody’s, Vietnamese banks achieved a higher aggregate return onassets for a second year running, registering a rise of 1.1 percent in 2018from 0.9 percent in 2017. Aggregate net income for the banks also rose 35 percentto 70 trillion VND (3 billion USD) last year from the previous year, despite amoderation of credit growth.
Independent banking expert Nguyen Tri Hieu also foresees rising foreign capitalinflow to the country’s finance and banking market in 2019.
“Many foreign investors, especially RoK ones, are showing big interest inVietnamese banks and finance companies,” Hieu said.
He explained the market, especially consumer finance, has high growthpotential, given the country’s population of more than 95 million with only 30percent of them having access to banking services.
According to experts, while it is hard for investors to own wholly foreignowned banks in Vietnam, especially after Deputy Prime Minister Vuong Dinh Huelast August said the Government would limit or possibly stop issuing newlicences for the establishment of wholly-owned foreign banks in the country,the best option for foreign investors to enter the Vietnamese market now isthrough mergers and acquisitions (M&A) with local banks and financialfirms.
“In the current context, the most common way for foreign investors to enter theVietnamese financial market is to acquire stakes in local banks or buyfinancial companies instead of establishing new ones,” Hieu said, adding theM&A would also help reduce many legal and procedural difficulties forforeign investors.
“Therefore, instead of paying a huge amount and spending a lot of timeestablishing a new company, M&A with local partners has more advantages,especially when local banks are also expecting to have capital from foreignshareholders to meet the central bank’s Basel II standards due to theunderdevelopment of the domestic capital market,” Hieu explained.
However, to make the M&A market in the finance and banking sector moreattractive to foreign investors, he suggested the Government increase theforeign ownership limit (FOL).
The current FOL of 30 percent isn’t encouraging foreign investors as they can’tbe involved in banks’ decision-making with the holding rate,” Hieu explained.
He also recommended the Government learn from other countries, where investorsare allowed to buy a part of a local bank or finance institution, instead ofthe whole institution as currently, with an aim to speed up M&A deals.
It isn’t necessary to merge the entire institution at the same time. Forexample, a foreign investor can acquire the credit business segment of a bankand ignore the service business segment when they see the former operatingwell. Then, they can consider restructuring the institution gradually andfinally acquiring the entire institution, Hieu said.
“It is also necessary to relieve the current regulations on becoming strategic shareholdersof banks and finance companies. According to the current regulations, toqualify to become strategic investors of local institutions, foreigninstitutions must be rated well by international rating agencies with totalassets of more than 20 billion USD and charter capital of at least 1 billionUSD,” he said.-VNS/VNA
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