Many commercial banks have increasingly participated in investment banking services with an annual increase in revenue.
Results from the flow of capital
In recent years, in addition to boosting retail banking products and services and developing digital banking, commercial banks are paying attention to investment banking (IB) services with main activities such as business consulting, IPO consulting, mergers and acquisitions (M&A), stock issuance, and underwriting through their securities companies.
According to Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), this bank’s securities company (VCBS), after 17 years in the market, has become one of the leading companies in brokerage, equitisation consulting, and M&A. It has acquired big contracts such as contract to act as auction agent for divestment of Sabeco and VCG, M&A consultancy contract for Textile and Garment Group, Pan Group, and Viet Y Steel Joint Stock Company. From 2017 to 2018, VCBS’s revenue surged 280 percent to 458 billion dong at the end of 2018.
Le Manh Hung, general director of VCBS, said that, in 2019, to make use of opportunities to cooperate with the flow of capital in the M&A and IPO wave, the company would continue to consider IB as a core area to promote the development of products and services. In 2019, VCBS will provide comprehensive and effective financial solutions to support partners to mobilise large amounts of money from M&A deals related to foreign factors and complying with international standards.
Not only VCBS, currently a number of securities companies under commercial banks are also planning to welcome the second wave of M&A and IPO. Some example of them are VCSC of Viet Capital Joint Stock Commercial Bank (Viet Capital Bank), BSC of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), MBS of Military Joint Stock Commercial Bank (MB), and TCBS of Vietnam Technological and Commercial Joint Stock Bank (Techcombank). Accordingly, VCSC, after reaping the after-tax profit of 823 billion dong at the end of 2018, has increased its charter capital to 1.6 trillion dong and focused strongly on developing the M&A brokerage business.
Meanwhile, in order to reform its operating scale and restructure its investment portfolio, MBS has recently approved the method of selling equity without a public bid to strategic investors whose shareholdings exceeds 25 percent. At the same time, it plans to issue 52.2 million additional shares to increase its chartered capital to 1.74 trillion dong and aim at 77.6 percent profit growth compared to 2018.
BSC’s movements are also exciting. With the solid support of BIDV’s digital banking service, the company has launched BSC i-Invest securities investment management application to help securities investors to exploit in-depth digitised platforms.
BSC’s leaders said that when the investment banking market becomes more and more attractive, the competition between securities companies and commercial banks is also increasingly fierce. In addition to attracting and taking advantage of big contracts, the development of products to support investors with small capital to participate in the professional market will also be a lucrative potential.
Movements of portfolio and personnel
According to the Research Group of Vietnam M&A Forum, in the period of 2019-2020, the M&A wave will continue to be strong. The government’s push to equitise and divest from state-owned enterprises (SOE) will make Vietnam continue to become the largest IPO market in Southeast Asia. This premise will make IB a ‘hot’ industry and bring big revenue to securities companies.
Chu Duc Tuan from Wall Street Securities Company said that, until now, most of the big names in international IB industry have appeared and traded in Vietnam such as Credit Suisse, Goldman Sachs, Morgan Stanley, J.P. Morgan, and Normura Securities.
Many local commercial banks have also participated in the field of IB in the form of opening securities companies. Therefore, in the coming years, IB activities will continue to be promoted by the banking system and there will be mergers between securities companies to carry out strong and professional IBs that can compete with 100 percent foreign-owned securities companies.
However, according to Tuan, legal regulations for IB in Vietnam are still not specified in the Law on Credit Institutions. Therefore, in order for IB to become a professional financial and economic industry, it is necessary to develop a legal framework for the establishment, organisation, operational mechanism, and independent supervision of IBs with clear distinction between the two models of commercial banks and IBs, proceeding to establish integrated banks and strong financial groups.
In addition, the management agency should soon make regulations on new financial products such as derivative products, structured bonds, products made from securitisation and high-yield bonds. After that, securities companies will be able to develop those products to supplement their business.
As for personnel, Hoang Hai Anh, vice Chair of Vietnam Securities Trading Association (VASB), said that in the context of increasing competitive among investment banking products and services, in the coming years, not only will the investment portfolio of securities companies and commercial banks shift, but also the personnel of the finance and banking sector will change significantly. In order to develop IB services, securities companies and commercial banks will increase recruitment of professional positions such as investment research, investment management, brokerage specialist, and cooperation specialist.
Therefore, the training of personnel in finance and banking sector in the coming years will also change. In addition to the expertise serving the development of digital retail banking such as UI/UX design, security, and algorithm design, expertise in IB will also be in high demand in the coming period.
