The proposal of J Trust (Japan) to desire to restructure Construction Bank (CBBank) once again raises the story of foreign investors participating in restructuring weak banks in Vietnam.
Many foreign investors want to pour capital into restructuring banks
In the meeting with deputy prime minister Vuong Dinh Hue last week, Nobiru Adachi, senior executive of J Trust Group, said that the Group wanted to participate in restructuring CBBank.
According to Nobiru Adachi, J Trust has spent a lot of time to learn and want to participate in the process of restructuring weak credit institutions and banks in Vietnam. The group also wants the government, the State Bank of Vietnam (SBV) to facilitate negotiations and transactions.
Deputy prime minister Vuong Dinh Hue said that the Vietnamese government wanted to find transfer partners or resell CBBank to partners to restructure the bank. He asked the J Trust to study and discuss with CBBank and SBV about the offer. On that basis, SBV would submit to the government and the prime minister for early consideration and resolution.
Vietnamese government leaders appreciate the experience of the J Trust in restructuring credit institutions. The government’s policy is to create conditions for domestic and foreign investors to buy back and develop weak banks in Vietnam.
Meanwhile, at the meeting with SBV Governor last weekend, Richard F.Chandler, President of Clermont Group also expressed his desire to invest in the banking sector through participating in restructuring the local banking system.
In another case, Srisawad Corporation (Thailand) has proposed to join the restructuring of the finance leasing company I (ALC I) of Vietnam Bank for Agriculture and Rural Development (Agribank). Srisawad Corporation proposed to pay Agribank 523 billion dong to own all of ALC I capital, of which 200 billion dong was to repay the charter capital and the rest was ALC I original debt borrowed from Agribank.
Regarding the restructuring of ALC I, SBV stated that it was studying and considering Agribank’s proposal to solve related issues. The ALC I restructuring plan has not been approved yet. The Thai partner’s proposal will be considered for handling after approval of the plan. Opportunities still remain open to Srisawad Corporation as well as other partners.
Is it easy to own 100 percent capital in a domestic bank?
The fact that foreign investors want to join the restructuring process in Vietnam’s banking system is no longer a new story. However, it is not easy to own 100 percent of weak banks in the country.
Previously, a bank that was forced to restructure was Ocean Commercial One Member Limited Liability Bank (Ocean Bank) and foreign partners wanted to buy it back. In early 2018, when official information was announced by SBV, foreign partners were in phase II of the inquiry process. However, so far, this deal has not ended yet.
In September 2013, the Investment Newspaper reported that United Overseas Bank (UOB) of Singapore might buy 100 percent of the shares of Global Petro Sole Member Limited Commercial Bank (GP Bank) if both parties agreed. SBV affirmed that it was considering and asking for the direction of the prime minister on restructuring GPBank on the basis of the participation of foreign credit institutions. But, more than a year later, when negotiations were almost complete, the deal was officially failed.
SBV Governor Le Minh Hung urged foreign partners to participate in restructuring Vietnamese banks. According to SBV, the banking sector continues to promote reforms and integration with regional and international financial systems, constantly improving capacity, applying international standards, and ensuring an equally competitive environment for foreign investors participating in the market.
Although SBV “turned on the green light” for foreign investors to buy shares exceeding the ceiling in weak banks, it does not mean that any investors can easily acquire domestic banks. According to Circular No. 38/2014/ TT-NHNN of SBV, guiding the implementation of the Decree No. 01/2014/ ND-CP of the government on foreign investors buying shares of Vietnamese credit institutions, in special cases, foreign investors can buy a percentage of shares that exceeds the allowed ceiling (30 percent) for weak banks. That means, the prime minister will decide the ratio of each specific case.
Being able to buy a percentage of shares that exceeds the ceiling also means that foreign investors can buy controlling shares for weak banks and even own 100 percent capital. This is what foreign investors have long expected.
Besides, Circular 38/2014/ TT-NHNN still opens a great opportunity for foreign investors in Vietnam, because SBV has oriented to maintain only 15-17 banks in the market, ie the market will be more open and competition will be less drastic.
Another supporting information is that applying for a license to establish a 100 percent foreign owned bank in Vietnam is not easy. At the 2018 M&A Forum organised by the Investment Review and AVM Company on August 8, 2018, deputy prime minister Vuong Dinh Hue said that the government advocated not granting more licenses to 100 percent foreign-owned banks, but encouraging foreign banks to buy weak domestic banks.
