The interest of many foreign investors in the recent time is not only a “detonator” to activate the mergers and acquisitions (M&A) market in finance and banking sector, but also a good opportunity for credit institutions (CIs) to accelerate the process of restructuring.
Foreign capital not only favours large banks
According to Dau tu newspaper, of the 11 financial leasing companies on the market, only eight units are operating and two units are in negotiation process to be acquired by foreign partners. Thus, after penetrating the lucrative consumer credit segment, foreign investors have started to pay attention to financial leasing companies.
The scale of Vietnam’s financial leasing market is small with outstanding balance of just 10 trillion dong while that of consumer credit market is nearly 1,000 trillion dong. However, that is why it is very potential. In 2017, BIDV financial leasing company was the first one to successfully sell 49 percent of stake to a Japanese partner.
The interest of foreign investors is bringing many expectations for financial leasing companies in the countries which have been operating inefficiently and even suffering losses. Previously, consumer credit companies in the country also fell into the same situation, but thanks to the investment of local and foreign investors, they have quickly restructured, such as FE Credit and MB Shinsei, etc.
In addition to finance companies and financial leasing companies, small-scaled banks in the recent time have gradually drawn attention after a long time of self-restructuring. According to NCB, with the consultancy of a leading investment bank from the United States (US), the bank is approaching the plan to sell shares to foreign partners.
“NCB has reported this policy in the scheme submitted to the State Bank of Vietnam (SBV) and will make a selection of potential partners among the investors who have sent proposals to present at the coming Annual general Meeting (AGM), said a representative of NCB.
In addition to NCB, the opportunities to find partners of many small-scaled banks are also open. Dr Le Xuan Nghia, an economic expert said that even the “zero-dong” banks have come into stable operation, in which some of them have recorded profits and been receiving great attention from foreign investors.
Obviously, in addition to the huge issuance to raise capital of Vietcombank and BIDV and Techcombank, etc. the M&A market is heated up everyday thanks to the calls for foreign capital to conduct restructuring
The golden time for restructuring
It is easy to understand why foreign investors are interested in pouring capital in banks with good financial background such as Vietcombank, BIDV, Techcombank, VPBank, HDBank, and TPBank, etc. However, the attention paid to some small banks or financial leasing companies shows the rising confidence of foreign investors in Vietnam’s finance and banking market. This is the opportunity for financial institutions to accelerate the restructuring process.
“Restructuring the banking system requires financial resources. Therefore, commercial banks should seize the opportunity of the increasing international capital investment to supplement Tier 1 and Tier 2 capital, improve financial resources, and meet new safety and management standards”, Dr Nghia recommended.
According to economic experts, the banking system has recovered strongly in the recent two years. Especially, the retail segment has been developing well with record high profit growth, making investors to no longer be hesitant with small banks as before.
In addition, since mid-January 2018, the effectiveness of the Law amending and supplementing some articles of the Law on CIs has made these small banks more attractive. According to SBV’s deputy Governor Nguyen Thi Hong, with this law, weak banks are having great opportunities to recover through the forms suitable to the market mechanism.
“In short, if the macroeconomic fundamentals are maintained and the scheme to restructuring banks is implemented seriously along with the creative endeavours of commercial banks, the restructuring of the banking system will achieve its goals and roadmap”, said Dr Nghia.
