After the deal between Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) and KEB Hana, a series of other mergers and acquisitions (M&A) deals in the banking sector are about to take place.
After completing the money transfer, on November 6th, KEB Hana (South Korea) has officially become a major shareholder of BIDV, closing a record deal in the banking sector with a value of more than 20 trillion dong.
However, an equally high-value deal is also drawing attention of the market. That is the sale of 6.5 percent stake by Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) to a foreign partner. The deal is expected to be in the end of 2019 or early 2020.
Based on the market price of Vietcombank shares at the end of the last session of the last week, 6.5 percent of Vietcombank stake is equivalent to over 22 trillion dong. If Vietcombank shares continue to increase as at present, this number will exceed one billion US dollars by the time the deal is closed.
Vietcombank’s representative said that the current offering is quite favourable because many foreign investors are interested in buying. The bright earnings outlook of Vietcombank (likely to double over the next five years) makes investors to grasp this opportunity.
It is likely that GIC an investment fund of Singaporean government will continue to participate in this offering, after pouring capital to buy 2.55 percent of Vietcombank’s capital in the end of last year. Vietcombank’s strategic shareholder Mizuho will continue to buy shares in this private offering to maintain ownership rate of 15%.
Among three state-owned banks, Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) has run out of foreign ownership room, but is in an urgent need to sell shares to increase capital. In early November 2019, VietinBank and some other state-owned banks had a meeting with the State Bank of Vietnam (SBV) and Ministry of Finance about retaining cash dividends to increase capital. The results have not been disclosed, but even if the Ministry of Finance and the National Assembly allows the bank to keep cash dividends for capital raising, VietinBank is still in a difficult situation.
The radical solution is that VietinBank needs to loosen foreign ownership room to sell capital. The bank’s leader has repeatedly proposed to pilot the reduction of state ownership to 51 percent (after 2020). In addition, VietinBank’s strategic shareholder MUFG Bank has also continuously expressed the hope to purchase more shares of the bank. MUFG’s deputy Chair once proposed to raise its capital contribution in VietinBank from 20 percent to 50%.
Private joint stock banks actively offer to sell shares.
State-owned banks are like a magnet for big investors. However, the attractiveness of private joint stock banks is also impressive. Representative of an investment fund said that during the past year, the investment fund has continuously received “offers” of foreign investors to buy stake of domestic banks.
Chair of National Citizen Commercial Joint Stock Bank (NCB) has recently met foreign investors from Japan and Singapore. The bank’s leader said that Japanese and Singaporean investors will buy shares in the bank’s coming issuance to become foreign shareholders of NCB.
Meanwhile, Military Commercial Joint Stock Bank (MB) has been eyed by many foreign investors, immediately after the bank announced the private offering of 7.5 percent capital to foreign investors. According to information from Bloomberg, MB is working with about 40 investors from different countries, including Japan, Hong Kong, Singapore, and South Korea, with an expectation of collecting 240 million US dollars from this offering.
In addition to the above banks, many other domestic banks are also seeking foreign strategic partners. Some weak banks in the restructuring process such as Ocean Bank and Construction Bank are also interested by investors from Japan and Singapore.
In the financial field, Hyundai Card (South Korea) is negotiating to buy 50 percent stake of Finance Company Limited for Community (FCCOM) under Maritime Commercial Joint Stock Bank (MSB) to penetrate into Vietnam’s consumer credit market. The deal is likely to be completed in the first quarter of 2020.
Talking to reporter of Bao Dau tu, banking expert Dr Can Van Luc said that the need to sell shares to raise Tier-1 capital of Vietnamese banks is very huge, while Vietnam’s banking market is still very attractive to foreign investors. The meet of supply and demand will make the banking M&A market in exciting in the future.
In addition, there are many other reasons for banking M&A to revive again in the near future, such as Vietnam’s economy is still a bright spot of the region, the government declared to not permit the establishment of new banks with foreign capital by the end of 2020, the State gradually lowers to ownership rate at state-owned banks, etc.
With these favourable factors and the uptrend of the stock market, the capital contribution wave of foreign investors into Vietnamese banks will surely continue.
