In the finance and banking field, it is not difficult to recognise that recently foreign capital has been poured actively into Vietnamese banks. However, the fact that foreign capital into banks is really effective and will help banks grow further or not is still a question mark.
After much speculation, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) recently said it would issue more than 603 million shares to KEB Hana Bank, collecting more than 20.3 trillion dong. After the issuance, this Korean investor would own 15 percent of stake in BIDV. Earlier, at the beginning of the year, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) also issued separate shares to GIC partner of Singapore and Mizuho Bankone of Japan’s biggest financial institutions, earning about 6.2 trillion dong (equivalent to about $265 million). In addition, with Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Kanetsugu Mike, general director of Mitsubishi UFJ Financial GroupMUFG said that as a strategic shareholder of VietinBank, MUFG was ready to support the bank to increase its charter capital to facilitate business. This is an urgent task, so the leader asked the government to create conditions for international financial institutions to invest more strongly in Vietnam’s banking sector.
In addition to the deals, many representatives of international banks express their desire to invest in the banking sector. In particular, not only the big banks attract foreign capital, but many medium and small banks also receive cash flows from abroad. Typically, Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank), Saigon Hanoi Commercial Joint Stock Bank (SHB), Orient Commercial Joint Stock Bank (OCB), Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), Tien Phong Commercial Joint Stock Bank (TPBank), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) have received capital up to hundreds of millions of dollars from international partners such as JPMorgan Chase Bank, IIB, IBEC, IFC and Deutsche Bank. The cause of this excitement lies in the positive signals from the Vietnamese economy that have helped banks achieve favourable business results, in addition, the open foreign investment policy, stable monetary policy and bank shares that always tend to lead the stock market have promoted foreign cash flow into the banking sector in our country.
According to financial experts, in the context that the State Bank of Vietnam (SBV) tightens short-term funding for medium and long-term loans, the provision and arrangement of long-term syndicated loans by foreign financial institutions will relieve this pressure for domestic commercial banks. In addition, foreign capital flowing into banks will also fulfil the shortage of capital for banks to meet Basel II standards, especially with four giant state-own commercial banks (Vietcombank, VietinBank, BIDV and Agribank). At the moment, their capital adequacy ratio (CAR) is close to the minimum thresholdapproximately nine percent, but these banks face difficulty in increasing their charter capital, while credit growth is high. Therefore, the private placement plan for foreign investors is considered the most satisfactory.
Although the benefits of attracting foreign capital to the banking and finance sector can be clearly seen, most banks have met the foreign ownership threshold of 30 percent as regulated. Typically, An Binh Commercial Joint Stock Bank (ABBank), TPBank, Vietnam Export Import Commercial Joint Stock Bank (Eximbank), Sai Gon Joint Stock Commercial Bank (SCB) and VietinBank all have reached the threshold. Therefore, foreign investors said that the tight limit level as currently was a barrier that made it difficult for banks to find strategic investors.
Recently, the Vietnam Association of Financial Investors (VAFI) proposed a limit hike to invite reputable foreign banks (according to the standards issued by SBV) to join to attract capital and technology. In particular, with an effective joint stock commercial bank, foreign capital ratio should be 49 percent. At the mid-term Vietnam Business Forum 2019 (VBF), Seck Yee Chung, Chair of the Information Technology Committee of the American Business Association in Vietnam (AmCham), said that Vietnam’s banking industry was applying one of the lowest rates of foreign ownership compared to other countries with comparable regional development. The expansion of foreign ownership would allow banks to mobilise international capital in the context of short-term medium-term capital.
In addition to many banks reaching the limit, there are still many banks that do not have foreign investors. Therefore, these banks are also actively improving the system, making efforts to enhance their operational ability to seek cooperation opportunities. Therefore, earlier this year, many small and medium banks plan to increase capital by calling for foreign cash flow. It can be said that banking is still a very attractive field, but it is important to attract investors effectively, regulators should continue to have policies to have open and flexible policy to help banks to expand foreign ownership, then to use cash flows carefully and suitably for growth. Therefore, the wave of attracting foreign capital is very exciting, but it is not easy to carry out without finding the right direction.
