Thursday, 23/03/2023 15:49

Banks continue with consolidation game

Activities pertaining to mergers and acquisitions across Vietnam’s banking system are expected to be robust in the foreseeable future as foreign strategic partners remain eager to broaden their influence.


VPBank last week was rumoured to be close to an agreement to sell 15 per cent of stakes to Sumitomo Mitsui Financial Group, one of Japan’s largest financial companies. The estimated agreement is valued at around $1.4 billion, cited Bloomberg.

“The Vietnamese bank will sell more than one billion shares to SMBC Consumer Finance, a unit of the Japanese megabank, for $1.35-1.39 each,” the newswire noted.

VNDirect Securities told VIR that due to a high capital adequacy ratio of 20.5 per cent in 2022, VPBank could receive a higher credit limit from the State Bank of Vietnam this year. In addition, the brokerage predicted that the bank would invest significantly to diversify its products and expand its footprint in other segments, such as VPBank Securities in the securities market or OPES – its new non-life insurance arm.

With the 15 per cent stake sale to SMBC, VPBank would consolidate and enhance its comprehensive partnership with Sumitomo Mitsui, stated VNDirect. Thus, the Japanese financial group could aid the Hanoi-backed bank in strengthening its banking governance processes and regulations, as well as providing access to abundant foreign capital.

“If the deal is completed, VPBank will become the second-largest commercial bank in terms of equity (excluding minority interests) in Vietnam, just behind Vietcombank,” VNDirect said.

As a result of Japan’s ultra-low interest rates and its shrinking market, SMBC is looking to capture lucrative prospects in developing economies in Asia through merger or acquisition.

In November last year, Sumitomo Mitsui announced that it would purchase an additional 15 per cent stake in the Rizal Commercial Banking Corporation of the Philippines – a move illustrating its bold ambition to tap into the Southeast Asian financial sector.

According to research by Mizuho Bank in late 2022, of the 15 foreign strategic investors involved in the divestment of Vietnam’s state-owned enterprises since 2012, nine are Japanese businesses.

“While there may be difficulties in the near future, Vietnam is still an appealing country for Japanese investors because of its high GDP growth rate each year,” said Soichi Nakajima, section manager of the Asian business group at the Mitsubishi Research Institute.

Elsewhere, Petrolimex last week also approved the plan to offer shares of its banking subsidiary, PGBank. Petrolimex plans to offer 120 million shares, equivalent to 40 per cent of its charter capital, with a starting price of VND21,300 (93 US cents) per share through a public auction at the Ho Chi Minh Stock Exchange.

The estimated time according to regulations on public offering auction is within 90 days from the effective date of the registration certificate offering.

Experts believed that Petrolimex’s divestment could lay a foundation for PGBank to find competent strategic shareholders with potential to increase capital after 12 years of stagnation. Currently, the bank has the lowest charter capital in the whole domestic banking system. Previously, it almost sold stakes to VietinBank, MSB, and HDBank. The last time PGBank expanded its financial foundation was in 2010 through issuing new shares and converting bonds.

Earlier this month, US-headquartered banking group Citi announced it has completed the sale of Citi’s Vietnam retail banking and consumer credit card businesses to Singaporean bank UOB, which includes the transfer of approximately 575 staff.

Citi and UOB first announced the transaction in early in 2022 as part of a broader sale agreement covering consumer banking across Malaysia, Thailand, Vietnam, and Indonesia, though excluding the bank’s institutional businesses.

Citi Legacy Franchises CEO Titi Cole said, “The completed sale of our consumer business in Vietnam puts us one step closer to delivering on our divestiture mandate as part of the firm’s strategy refresh. We are confident that our former employees have a bright future at UOB, and we look forward to seeing them thrive.”

This month, BRG-backed SeABank received an investment of $100 million from the International Finance Corporation in a bid to promote housing lending, which increased the total investment from the corporation into the bank to nearly $400 million.

In February, SeABank successfully raised its charter capital from $837 million to over $862 million after a share issue under the 2022 employee stock ownership plan. And last year, it signalled its intention to sell up to 15 per cent of its shares to foreign investors.

The bank was reportedly working with a financial adviser to try to pique the interest of potential purchasers, which may include private equity firms and other financial institutions.

Meanwhile, FPT Capital – the investment fund manager of FPT Group – last week completed its sale of around 783,000 shares of TPBank’s charter capital. After the transaction, FPT Capital no longer holds any shares in TPBank.


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