The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) officially took effect and Vietnam is also preparing to sign a Free Trade Agreement with the EU (EVFTA), promising a rising wave of foreign capital flowing into Vietnam.
Statistics of the Foreign Investment Agency (Ministry of Planning and Investment) also showed that the total foreign investment capital which were newly registered, added, and used to purchase shares in the first two months of 2019 reached up to 8.47 billion US dollars, up by more than 2.5 times compared to the same period of 2017.
In the banking and finance sector, it is not difficult to see that foreign capital has been showing positive signs. For example, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) has recently raised its charter capital to more than 37 trillion dong. This is the result of Vietcombank’s sale of shares to its strategic shareholder Mizuho and GIC investment fund from Singapore. The deal helps GIC gains a 2.55 percent ownership and Mizuho maintain a 15 percent ownership at Vietcombank. Mizuho Financial Group (Japan) in a recent meeting with Vietcombank committed to maintaining equity investment in Vietcombank.
The market is also expecting the sale of Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV)’s capital to KEB Hana (from South Korea).
Meanwhile, at the recent meeting with prime minister Nguyen Xuan Phuc, Mitsubishi UFJ Financial Group the strategic foreign shareholder of Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) also expressed the willingness to support VietinBank to increase its charter capital and hopes the Vietnamese government approves this.
For Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank), NongHyup Financial Group (South Korea) has recently proposed to give support to Agribank’s equitisation process. Agribank Leasing Joint Stock Company I (ALC I) also received proposal from Srisawad Corporation from Thailand about returning 100 percent of ALC I’s charter capital to Agribank and paying all the original debts that ALC I borrowed from Agribank in order to wholly own this finance company.
Talking to reporter, banking and financial expert said that currently, Vietnam in general and some Vietnamese banks in particular are receiving much attention of foreign investors. The good growth trend of Vietnam’s macroeconomic indicators, the positive reforms of the banking sector, the more attention paid to Vietnam on the world financial market, the open policies for foreign investors, etc. are factors supporting stronger foreign capital flowing into Vietnam’s banking sector in the near future.
“In Asia, South Korea, China and Japan are potential investors for Vietnam’s finance and banking market,” said the expert.
In addition, the recent report of Moody’s also forecasted that mobilising capital will be the focus in 2019 as most Vietnamese banks are in need of increasing capital to ensure the requirements of the Basel II standards set out in Circular 41. Many banks still have room for foreign investors, particularly those banks that plan to list in 2019 as they will take the opportunity to call for foreign capital in order to enhance financial capacity and expand operation.
The project on “Restructuring the stock market and insurance market until 2020 and orientation to 2025″ which has been approved by the prime minister at the end of February sets out a series of solutions to restructure the market. In particular, regarding the listing and registration of bank stocks, the project requires all banks to list and register for trading on official markets including HCM City Stock Exchange (HoSE), Hanoi Stock Exchange (HNX), and Unlisted Public Company Market (UPCoM) by the end of 2020.
In the Vietnam Banking Industry Development Strategy until 2025 with orientation to 2030, the State will reduce state ownership at state-owned banks to 65 percent, and then 51 percent. For state-owned banks, reducing state ownership to 65 percent and then 51 percent, according to the above-mentioned expert, is very good move. However, for foreign investors, they have long wanted to an ownership rate which allows them to have more decision-making power then they join the Vietnamese banking and finance sector.
It should be frankly seen that for foreign investors, Vietnamese banks are making strong progress. However, there still shortcomings and Vietnamese banks need to make much effort to go deeper into the global financial market with international practices.
“Expanding room for foreign partners needs a roadmap. We should not immediately open wide to receive massive investments from foreign countries, because there will be great impact on the banking sector if foreign investors can only involve in banks at limited share ownership rate,” said the expert.
Nevertheless, the expert also found out that Vietnam needs to have relatively harmonious consideration about accepting to open more room for investors to pour money in the banking sector to help banks raise capital and meet the regulations set in Circular 41.
“Consolidating the trust of foreign investors should go with appropriate legal framework, as it will be very difficult to attract foreign partners if there are legal restrictions for them”, said the expert.
Meanwhile, commercial banks need to have financial forecasts for foreign partners about uhow to use the invested capital.
“Banks should have a plan on how to use such cash flow for developing assets, how much to lend out, how to use on the interbank system, whether it will be used for supplementing fixed assets, building branches, buying real estates, or investing in information technology.
In addition, when pouring money into the system, foreign investors will check to see whether the bank meets the Return on investment (ROI) to in order to persuade investors. This must be considered cautiously, said financial expert Dr Hieu.
