Foreign capital returns to Vietnam’s banks

BIDV, one of four state-owned banks, has consulted with shareholders on a plan to issue shares to the foreign strategic investor KEB Hana Bank from South Korea.



It is expected that the amount of shares to be issued to KEB Hana Bank would account for 15 percent of charter capital after the issuance, or 17.6 percent of the current charter capital.



After the issuance, the bank’s charter capital would rise to VND40.220 trillion, while the state’s ownership ratio will reduce from 95.28 percent to 80.9 percent. KEB Hana Bank will hold 15 percent of shares and non-state shareholders 4.01 percent.



Vietcombank, another state-owned bank, has got approval from the State Bank to issue shares to specific shareholders to raise the charter capital by 10 percent. Singaporean national investment fund GIC and the existing foreign shareholder Mizuho Bank from Japan, will be the potential partners for the share issuance campaign.

However, BIDV and Vietcombank are not the first banks taking full advantage of the foreign capital flow to Vietnam to raise their charter capital.



In April, Techcombank sold 164 million shares to foreign investors at the price of VND128,000 per share, collecting $922 million.



In March, Warburg Pincus decided to pour $370 million into Techcombank, the biggest private equity investment deal at that time in Vietnam. The bank’s IPO also attracted foreign investors, including GIC, Dragon Capital and Fidelity Management.



In 2017, when HD Bank made its IPO in December, 76 foreign investors spent $300 million to buy HD Bank shares, or 21.5 percent of the bank’s charter capital, making HD Bank’s IPO the second largest deal in Vietnam’s banking history.



Of the 76 foreign investors, many were investment funds, foreign banks and large financial institutions. These included Credit Saison from Japan, Deutsche BankAG (Germany), JPMorgan Vietnam Opportunities Fund, CAM Bank (Japan), RWCFrontier Markets Opportunity Master Fund (the UK), Macquarie Bank (Australia), Charlemagne(UK); Dragon Capital (UK), and Vina Capital.



Raising charter capital for state-owned banks (BIDV, Vietcombank, VietinBank and Agribank) was first mentioned in 2016 when the State Bank planned to apply Basel II standards. However, the application has been delayed until 2020.



Since then, the banks have not found a way to increase charter capital.



The new strategic partner for BIDV has nearly been identified – KEB Hana Bank, a large bank in South Korea. Things are also expected to go smoothly in negotiating with GIC and Mizuho. 



Meanwhile, VietinBank may find it difficult to increase capital because the state ownership ratio in the bank has fallen to 65 percent.