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Business Deals

Warburg Pincus to pump $370m into Vietnam's Techcombank

Following HSBC's withdrawal, Hanoi-based lender finds new foreign investor

Techcombank staff handle stacks of Vietnamese dong.   © Reuters

HO CHI MINH CITY -- Vietnam Technological and Commercial Joint Stock Bank, or Techcombank, said on Monday that U.S.-based private equity firm Warburg Pincus plans to invest $370 million in the lender.

The investment, subject to regulatory approvals, is a part of Techcombank's fundraising effort, to help it expand. Techcombank did not disclose how much Warburg Pincus will hold in it if the deal was approved. Warburg Pincus is planning to make the investment through two entities it holds.

Last year, global bank HSBC sold 172 million shares or 19.41% of Techcombank back to the lender after 12 years as its strategic investor. After the buyback, Techcombank eliminated its foreign ownership limit, before increasing it again to 8.54% at a annual general meeting earlier this month to prepare for a new foreign investor.

Techcombank has more than 5.4 million customers in Vietnam across a network of 315 branches. In 2017, Techcombank posted a pretax profit of 8.5 trillion dong ($373.4 million), doubled from 2016. It has set a target of reaching 10 trillion dong in pretax profit for 2018.

The market cap of Techcombank is estimated as $3.94 billion, according to Saigon Securities. The bank's shares are trading over the counter at the price of around 100,000 dong apiece, which is much higher than the 72,000 dong that the stock of Commercial Bank for Foreign Trade of Vietnam, or Vietcombank, is trading at. Vietcombank is the highest-priced bank stock locally.

Techcombank, one of the largest private commercial banks in Vietnam, was founded by a group of Vietnamese businessmen who returned from Russia in 1993. Vietnam Airlines was its largest investor at first. Since 2009, Masan group, a leading Vietnamese consumer goods producter, has become the largest investor in the lender. 

Techcombank was among a group of lenders to carry out reforms and to schedule a listing on the stock market last year. The shareholders approved plans to list its shares on Ho Chi Minh City stock exchange later this year. 

Techcombank Chairman Ho Hung Anh said demand for banking services is sharply accelerating with increasing spending power in the population of more than 93 million people.

Vietnam's banking penetration rate remains low, at just 30%, compared with Indonesia with 56%, Thailand with 71% and Malaysia with 77%.

The investment and expertise in the financial services sector from Warburg Pincus will support Techcomback's long-term growth, further consolidate its dominant position in Vietnam and help it to become a leading bank in Southeast Asia, said Saurabh Agarwal, a managing director at Warburg Pincus.

This transaction marks the largest-ever private equity investment in Vietnam to date and brings Warburg Pincus' total investment in Vietnam to over $1 billion, after significant injections into Vincom Retail, a subsidiary of Vingroup, and a joint venture focused on industrial and logistics properties and services with Becamex IDC Corp.  

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