HANOI: Vietnamese banks are planning nearly US$7bil in share sales as the country’s fast-growing economy fuels demand for capital, opening a window for foreign investors to expand in the tightly controlled sector.
Communist-run Vietnam, which reported growth of nearly 10% in the last quarter, has one of Asia’s fastest-growing banking industries but access has been restricted, with cumulative foreign ownership capped at 30%, individual stakes limited to 20% and offshore borrowing subject to strict limits.
But in recent months, top leader To Lam’s drive to turbocharge economic growth with major infrastructure spending has ushered in a more open approach, as policymakers view larger foreign participation as necessary to meet growing credit demand amid a domestic funding squeeze.
As a result, bank share sales could raise nearly US$7bil by the end of next year, according to Reuters calculations based on public disclosures and a Fitch Ratings report, which noted that this was likely Vietnam’s largest-ever wave of capital raisings by lenders.
The ceiling on offshore borrowing was also raised this year by 11% to US$6.1bil and it could rise further.
Three local lenders have been allowed to increase their foreign ownership limits to 49%, while stock-market reforms secured Vietnam’s upgrade to emerging status by index provider FTSE Russell last month.
Separate plans to set up international financial centres also promise more foreign capital inflows.
A couple of foreign lenders involved in equity talks with Vietnamese partners cited gains on their financial investments and greater access to the country’s growing consumer market for products like insurance as reasons to expand there, according to two people familiar with the discussions who requested anonymity because the matter was private.
Vietnam is allowing more foreign capital into its banks as “it is beginning to rethink how its next phase of growth will be financed”, said Quynh Nguyen, a finance lecturer at Hoa Sen University in Ho Chi Minh City.
She cautioned, however, that the move was selective and did not amount to a wholesale liberalisation.
The share offers have increased foreign interest, “particularly from strategic investors who are already familiar with Vietnam and are now considering deeper exposure”, Quynh said.
Japan’s Sumitomo Mitsui Banking Corp (SMBC) is in talks with Vietnamese partner VPBank to raise its stake to 20% from 15% as VPBank seeks a private placement worth US$560mil at current market prices, Reuters reported in September.
VPBank is allowed to raise its foreign ownership cap to 49%.
Vietcombank, the country’s largest lender, has also unveiled plans to sell 6.5% of its shares by year-end in a transaction worth around US$1.2bil at current prices.
Japan’s Mizuho Bank, its current largest foreign investor with a 15% stake, “may potentially increase its holding”, according to minutes from a Vietcombank shareholder meeting in April.
Mizuho declined to comment.
BIDV, Vietnam’s second-largest lender, sold roughly 3% of its shares to dozens of investors in March and intends to sell almost another 11% by the end of next year for a total value of approximately US$1.4bil, according to public disclosures.
Its top foreign shareholder, South Korea’s KEB Hana, did not participate in the first placement but is considering whether to participate in the new plan.
“We see some opportunities among the smaller banks to score some tie-ups down the line, provided Vietnam can maintain its growth story,” Fitch’s Willie Tanoto said.
HDBank has said it plans to sell a 10.7% stake by the end of next year.
The private bank – linked to Vietnam’s largest private airline Vietjet – does not have a large foreign investor and is allowed to raise its foreign ownership to 49%.
Separately, Techcombank, one of the country’s largest private lenders, has discussed a stake sale with foreign lenders, Reuters reported in August.
Meanwhile, Vietnamese banks and corporations disclosed offshore borrowing plans for an aggregate value of US$5.3bil this year, according to FiinRatings, an S&P Global partner.
The Finance Ministry is also considering an offshore sovereign bond sale that would be the country’s first since 2014.
Banks are also weighing offshore bonds while large municipalities may be able to tap international capital markets with debt offerings under new rules. — Reuters
