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Opportunities for foreign investors to acquire Vietnamese banks

According to the Vietnam and the European Union Free Trade Agreement (EVFTA), within five years of its entry into force, Vietnam is committed to facilitating and allowing EU credit institutions to increase their holdings to 49% of charter capital in two Vietnamese joint stock commercial banks (not applicable to the “Big 4” banks).

 

Successful M&A deals

In the past five years, there have not been many merger and acquisition (M&A) deals among domestic banks. The M&A deal between PGBank and HDBank, although approved by the State Bank, has not been completed yet. In contrast, M&A deals between foreign investors and domestic banks have somewhat been more active.

 

 After the sale of shares of Techcombank, HDBank, and TPBank to foreign investors before being listed on HOSE in the beginning of 2018, Vietnam’s banking system has witnessed many more deals. The most recent deal is the one between Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) and KEB Hana Bank (South Korea), which is worth 875 million USD.

 

Capital from foreign strategic investors not only helps domestic banks that are lacking in capital (BIDV is a typical example when its CAR ratio reached 8.77% at end of 2019 after the deal) but also attracts more investors to Vietnam through M&A activities.

 

However, to have a suitable foreign strategic shareholder is not easy for each because it may take many years for a deal to be settled. Most recently, the sale of 15% of OCB's chartered capital to Aozora Bank (AOZ - Japan) in mid-June 2020 also underwent a process of understanding partners and negotiations lasting for more than two years.

 

Opportunities are wide open

The mobilization of foreign capital to increase financial potential has always been concerned by domestic banks, especially small and medium-sized banks. However, since the outbreak of Covid-19, not only domestic enterprises but also large financial corporations in the world have been affected.

 

Besides, banks that still have foreign rooms or have nearly run out of room also want to have space to find opportunities after the epidemic is completely controlled. Therefore, many banks have "locked" foreign room until the situation improves.

 

Specifically, Techcombank only slightly changed the foreign room to 22.5% to help the foreign general director buy 439,000 TCB shares through the transfer of shares outstanding on the stock market. HDBank announced the resolution of the Board of Directors that adjusts the share ownership ratio of foreign investors from 30% to 21.5% to facilitate cooperation with strategic partners in the near future.

 

Similarly, VPBank has decided to "save" room for foreign investors when reducing foreign ownership ratio from 22.77% to 15%. Since separating from Singapore Oversea - Chinese Bank (OCBC) at the end of 2013, VPBank has not had a new foreign strategic shareholder.

 

Most recently, on October 12, 2020, Viet Capital Bank (BVB) closed the list of shareholders to collect shareholders' written opinions by authorizing the Board of Directors to decide the foreign ownership ratio in accordance with current regulations (maximum rate is 30%).

 

According to the Decree 01/2014 / ND-CP, the share ownership ratio of a foreign strategic investor must not exceed 20% of the charter capital of a Vietnamese credit institution and the total share ownership ratio of all foreign investors in a domestic credit institution must not exceed 30% of the charter capital.

 

Currently, many Vietnamese banks have sold capital to foreign investors, but many still have foreign rooms left. That is not to mention the restructuring banks or the three banks that have been acquired by the State Bank with "zero dong" which could be 100% owned by foreign partners with the consent of the Government. Therefore, there are still a lot of opportunities for foreign banks to conduct M&A deals with domestic banks in the coming time.

 

In addition, according to EVFTA, there are commitments and incentives between Vietnam and the EU in terms of trade, services and investment. Notably, for banking services, within five years of EVFTA's entry into force, Vietnam is committed to facilitating and allowing EU credit institutions to increase their holdings to 49% of charter capital in two joint stock commercial banks in Vietnam (not applicable to the four joint stock commercial banks where the State is holding dominant shares, namely BIDV, VietinBank, Vietcombank and Agribank).

 

Some banks including VIB, VPBank, Techcombank and ACB, are believed be potential “candidates” for room expansion as proposed by European banks under EVFTA. At present, ACB has run out of foreign room and Techcombank, VIB and VPBank have lowered their foreign room to 22.5%, 20.5% and 15%, respectively.

 

Source: thesaigontimes – VietnamCredit

  

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