Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) has sold 15 percent of stake to KEB Hana from South Korea for nearly 20.3 trillion dong, equivalent to 882 million US dollars. This is a record high M&A value in the banking sector.
At the above price, each of BIDV share was bought by the partner at 33,640 dong. Banking expert cum senior advisor of BIDV’s Board of directors (BOD) Dr Can Van Luc assessed that this is a very good price for both parties.
BIDV is the last state-owned bank to finally sell its shares to a foreign strategic partner. Previously, in 2012, Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) sold 20 percent of its stake to Tokyo Mitsubishi UFJ at a price of 743 million US dollars. In 2011, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) sold 15 percent of its shares to Mizuho for 567.3 million US dollars.
Thus, these above three deals brought a total value of nearly 2.2 billion US dollars to three big state-owned banks, thanks to carrying out private placement to foreign strategic partners.
The sale of stake of BIDV was fairly slow compared to the other two banks, mainly because its Initial Public Offering (IPO) took place at the time of economic crisis (IPO in 2011 and listing in early 2014) and the offering of shares to strategic partner was difficult to achieve high efficiency.
Leader of BIDV said that dozens of foreign investors had come to the bank but only decided to sell stake to KEB Hana in 2018. The completion of the M&A deal will help BIDV resolve the Capital Adequacy Ratio (CAR) and have more resources for doing business and clear bad debts.
After completing this deal, BIDV has lowered the state ownership to 80 percent instead of above 95 percent as before. The foreign ownership room of the bank is still 15 percent empty.
Meanwhile, after the deal with Mizuho in 2011, Vietcombank asked the government for permission on selling an additional 10 percent of stake to foreign investors. However, only until the end of 2018, the bank successfully sold three percent of shares to GIC and its existing shareholder Mizuho. The bank is completing procedures to soon sell the remaining seven percent of stake.
Among the above three banks, only VietinBank has used up its foreign ownership room and is struggling to increase capital.
Although state-owned banks hold record high M&A values, private commercial banks are the leaders in selling capital to foreign strategic partners.
It can be said that private commercial banks have opened a wave of attracting foreign investment in the banking sector, starting with three large deals in 2005 including the acquisition of over 8.5 percent stake of Asia Commercial Joint Stock Bank by Standard Chartered, the acquisition of 10 percent stake of Vietnam Technological and Commercial Joint Stock Bank (Techcombank) by HSBC, and the acquisition of 10 percent of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) by ANZ.
These three successful deals have made numerous investors to massively pour capital into the Vietnam’s banking market. Banks such as Vietnam Prosperity Commercial Joint Stock Bank (VPBank), Orient Commercial Joint Stock Bank (OCB), An Binh Commercial Joint Stock Bank (ABBank), Export Import Commercial Joint Stock Bank (Eximbank), Hanoi Building Commercial Joint Stock Bank (Habubank), Vietnam International Commercial Joint Stock Bank (VIB), Southeast Asia Commercial Joint Stock Bank (SeABank), etc. were also racing to find foreign strategic investors. The wave of calling for foreign capital through strategic partnership only halted in 2011, when the banking system of Vietnam was in crisis.
The specific value of many deals was not announced, but with the average holding of 10-15 percent for each deal, the amount of capital that investors poured into domestic banks in this period was fairly significant, from a few dozens to hundreds of million US dollars. This is an important resource to help banks improve their charter capital, equity and business capital.
However, due to limitations on holding rates, most strategic partners cannot help domestic banks to enhance governance and technology. This makes many M&A deals to have not brought much resonance value.
After the period of massive capital pouring in 2005 2011, from 2012, particularly in the last three years, the market has witnessed the end of some deals. Some of those ended because investors wanted to take profits when they achieved their expected profits, while some of the deals were not successful.
In 2012, ANZ officially divested all of its investment in Sacombank. According to information, a group of shareholders approached and asked ANZ to sell these shares at an attractive price. Similarly, in 2013, OCBC divested from VPBank, collecting more than 14 million US dollars of profit.
Numerous other farewells took place in 2017 and 2018, between Techcombank and HSBC, ACB and Standard Chartered, and OCB and BNP Paribas. Most recently, in early 2019, the market recorded another breakup between SeABank and Societe generale.
Thus, among 12 deals to sell shares to strategic investors over the past 15 years, six investors have carried out divestments.
According to analysis of banking experts, most foreign investors when investing in Vietnamese banks aim to make profit rather than long-term commitment, especially investors from the Europe. Therefore, it is understandable when these investors wanted to take profits or restructure their portfolios.
Nevertheless, the divestments of some foreign investors do not mean that the banking market of Vietnam is no longer attractive. Over the past 15 years, foreign investors have still looking for ways to penetrate in the Vietnam’s banking system, especially investors from the Asean, South Korea, Japan, etc. The number of banks with 100 percent foreign capital and foreign bank branches in Vietnam have also increased rapidly. Not to mention, many investors have acquired domestic finance companies and fintechs.
In addition to investors withdrawing from the market, numerous others investors are still holding on, such as Mizuho, CBA, Deutsche Bank, Tokyo Mitsubishi UFJ, Maybank, etc. Moreover, numerous other investors are also trying to buy more shares of Vietnamese banks, such as GIC fund from Singapore, J.Trust from Japan, Srisawad from Thailand, Clermont group from Singapore, etc.
Experts believe that the good economic growth of Vietnam, the recovering stock market, and the increasing need to raise capital to meet the Basel II standards of Vietnamese banks will make M&A deals more exciting in the near future.
However, the forms of mobilising foreign capital of banks will be more diverse. Some banks will continue to seek strategic partners, but some other banks will choose to sell to foreign financial investors such as Techcombank, HCM City Development Commercial Joint Stock Bank (HDBank), etc.
