The banking sector is expected to have a number of huge deals related to foreign investors’ purchase of shares in Vietnamese credit institutions (CIs) when the sector is in the final state of restructuring and banks must apply Basel II international standards.
Plan to call for foreign capital
Opening the year 2020, the State Bank of Vietnam (SBV) allowed Orient Commercial Joint Stock Bank (OCB) to increase its charter capital from 7.899 trillion dong to more than 8.767 trillion dong by offering shares to foreign investors on March 13th. Previously, OCB was approved by shareholders to conduct a private placement of nearly 86.9 million shares, equivalent to 11 percent of charter capital, to Aozora Bank from Japan. All collected capital would be used for supplementing business and investment capital, and lending.
OCB’s senior leader said that the offered share price would not be lower than the book value per share of the bank at the end of the latest quarter. These shares are restructured to transfer for three years. After issuing to Japanese bank, OCB will continue to carry out a private placement of more than 31.6 million shares.
Previously, OCB’s strategic shareholder BNP Paribas (France) fully sold over 74 million shares, equivalent to 18.68 percent of OCB’s charter capital after 10 years of investment. Currently, in addition to Aozora, OCB has another foreign shareholder owning 4.98 percent of its charter capital: Vina Capital. Trinh Van Tuan, OCB’s Chair, said that after completing the sale of capital to foreign investors, the bank will choose an appropriate time to list shares on the stock market.
Saigon Hanoi Commercial Joint Stock Bank (SHB) and Saigon Commercial Joint Stock Bank (SCB) said that they will sell stake to foreign investors to enhance financial capacity. Vietnam Prosperity Commercial Joint Stock Bank (VPBank) and Military Commercial Joint Stock Bank (MB) also have plan to sell more stocks to foreign investors. In particular, MB expects to offer 7.5 percent of capital to foreign investors.
Nam A Commercial Joint Stock Bank (NamABank) targets to increase its charter capital to five trillion dong this year, including a plan of calling for foreign capital. According to a financial analyst, the foreign capital flowing in Vietnam will continue to strongly poured into mergers and acquisitions (M&A). In particular, financial services, including fintechs, consumer finance, banks, etc. always draw investors’ attention.
According to regulations in Decree 01/2014/ND-CP about foreign investors’ purchase of shares in Vietnamese credit institutions (CIs), the shareholding ratio of a foreign strategic investor must not exceed 20 percent of the charter capital of a Vietnamese CI, and the total share ownership of foreign investors must not exceed 30 percent of the charter capital of a Vietnamese CI.
In special cases, to carry out the restructuring of a weak CI which faces difficulties, to ensure the safety of the CI system, the prime minister shall decide on the share ownership ratio of a foreign organisation, a foreign strategic investor. The total share ownership of foreign investors in a weak CI may exceed the prescribed limit.
The policy of the government and the SBV also promote the attraction of foreign capital to the restructuring of weak banks including Construction Bank, Ocean Bank and Global Petro Bank. Some foreign investors currently expect to join the restructuring of these banks. Nobiru Adachi, Chair of J.Trust Bank said that J.Trust has studied and carefully calculated the financial indicators of CB and sent an offer to the SBV regarding the acquisition of the bank for restructuring.
Similarly, Han Chang-woo, Chair cum general director of Maruhan Group expressed his expectation of receiving support from the prime minister and Vietnamese authorities in the process of participating in restructuring Vietnamese banks, particularly OceanBank. According to the SBV, the agency has completed and submitted the prime minister the plan to transfer and restructure OceanBank after selling stake to foreign investors.
An expert in finance and banking sector said that the compliance with Basel II standards from 2020 will cause many banks to consider mergers and acquisitions (M&A), because increasing capital to meet Basel II standards is not an easy task. Thus, M&A in banking sector is forecasted to be more exciting and the value of the deals will be higher. Notably, the restructuring process of the sector will enter the final stage, in which weak banks which are under special control such as Dong A Commercial Joint Stock Bank (DongABank) will be promoted.
According to the Vietnam EU Free Trade Agreement (EVFTA), CIs from EU have the opportunity to own up to 49 percent of the shares in a Vietnamese banks (maximum two banks, except the four banks which are owned by the SBV). However, according to experts, the possibility of EU banks and financial groups to own 49 percent of Vietnamese banks is unlikely to happen.
Dominic Scriven, Dragon Capital’s Chair said that in the context when many banks are striving to mobilise capital to meet Basel II standards, the government should allow foreign ownership limit at banks to increase from 30 percent to 49 percent in order to attract foreign capital, boost restructuring and meet international standards.
