The trend of looking for foreign partners of Vietnamese banks is getting hotter, although many domestic banks and foreign strategic partners “broke up” in recent time.
Recently, Southeast Asia Joint Stock Commercial Bank (SeaBank) said that the foreign strategic shareholder Societe generale (France) had withdrawn all of its investment after 10 years. Societe generale has invested in SeaBank since 2008 and raised its ownership to the maximum level of 20 percent.
Not only SeaBank, in the last two years, there have been 5-6 similar cases. Among them was the break up with foreign partners of Asia Commercial Joint Stock Bank (ACB) after more than 12 years of cooperation. Standard Chartered Bank realised the investment profit with a 10 percent shares holding in ACB in early 2018, earning a total of over 6 trillion dong.
The story of ACB and Standard Chartered Bank started in the middle of 2005. The relationship was implemented via a comprehensive technical support agreement. During the cooperation, Standard Chartered Bank transferred skills and trained people to replace its seconded specialist at ACB.
Meanwhile, Orient Commercial Joint Stock Bank (OCB) also separated from foreign partner BNP Paribas (France) after 10 years together in early 2018. BNP withdrew over 74,705 million OCB shares, equivalent to 18.68 percent of OCB chartered capital. Before that, in addition to becoming a strategic shareholder of OCB, BNP Paribas also provided financial and human resources supports for this bank.
Not long before, in mid-2017, HSBC divested 20 percent capital from Vietnam Technological and Commercial Joint Stock Bank (Techcombank), after 12 years of cooperation.
According to Hochiminh City Securities Company (HSC), at the price of 30,000 dong/share at that time, after divesting all capital from Techcombank, HSBC could collect 5.17 trillion dong, with nearly 700 billion dong of profit over the initial investment.
However, after divesting from Techcombank, many people said that HSBC felt regretful since Techcombank’s share price increased sharply from the end of 2017 to the time of listing in early 2018.
While many foreign partners divested, the trend of finding foreign partners of Vietnamese banks is still hot. After farewell one foreign partner, domestic banks have quickly cooperated with other foreign partners. For example, with the case of Techcombank, HSBC divested when this bank’s share price was low and after many years with no dividends, however, by early 2018, Techcombank had closed the foreign room to collect $370 million from the strategic investor, Warburg Pincus, and made 200 percent cash dividend.
Huynh Buu Son, finance and banking expert, said that foreign capital flow is always necessary for the banking system, since the capital mobilisation from domestic investors is still limited. In particular, in the period of shifting to higher governance standards, such as Basel II, foreign capital can be an indispensable force to solve the “thirst for capital” issue.
It can be seen that the Vietnamese banking “pie” is always attractive to foreign strategic investors. Besides early farewells between domestic banks and foreign partners, there are still close and sustainable relationships. Commonwealth Bank of Australia (CBA) has invested in Vietnam International Joint Stock Commercial Bank (VIB) since 2010 and is still holding 20 percent of the bank’s capital so far. In mid-2017, CBA even sold all of its branch operations in HCM City to VIBa move that was highly appreciated for greater cooperation.
At the 2019 Annual general Meeting of Shareholders on 23rd March 2019, the representative of CBA said that they have been with VIB during the past 10 years, with the bank’s profit margin growing high. Notably, VIB has made remarkable achievements in the process of applying the Basel II standards and settling bonds of Asset Management Company of Vietnam credit institutions (VAMC). For this, CBA continues to accompany VIB.
Mizuho recently bought more shares in Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) to keep the 15 percent ownership rate when this leading bank issue private equity for other partners.
In Vietnam Joint Stock Commercial Bank of Industry and Trade (Vietinbank), The Bank of Tokyo-Mitsubishi UFJ (MUFG) has owned nearly 20 percent, the maximum ratio allowed for an entity shareholder to hold in a Vietnamese bank. However, this partner wishes to contribute capital to VietinBank in the coming capital raising sessions.
Explaining the reason for the break up between foreign investors and domestic banks, a bank’s leader said that one of the biggest limitations of foreign strategic investors is to see Vietnam market as a short-term investment destination, mainly consider investment in Vietnamese banks an investment that they can restructure the portfolio at any time.
That is also the reason some banks have chosen the strategy to sell capital to foreign shareholders in the form of financial investment. Hochiminh City Development Joint Stock Commercial Bank (HDBank) sold 21 percent of its capital to 76 foreign investors in early 2018. Warburg Pincus’ investment in Techcombank was also done through two affiliate investment funds.
