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Asia300

Vietcombank prepares to sell 10% stake to foreign investors

State lender says GIC, Mizuho among potential buyers

A woman rides a bicycle past a logo of Vietcombank, in front of the State Bank building in central Hanoi.   © Reuters

HO CHI MINH CITY -- The Commercial Bank for Foreign Trade of Vietnam, or Vietcombank, is planning to sell more than 350 million shares, or a 10% stake, to foreign investors in the first half of 2018, following a green light from the government.

Vietcombank chairman Nghiem Xuan Thanh told reporters that the plan for the private equity placement had been approved by the relevant authorities. The shares will be issued by way of public auction or private placement to a limited number of foreign investors.

He added that Singapore sovereign fund GIC was among the potential buyers. Japan's Mizuho Bank, the biggest foreign investor in Vietcombank with a 15% stake, will be allowed to buy additional shares to maintain its ownership ratio at the bank.

In Vietnam, foreign ownership in state banks are capped at 30%. Vietcombank is among a small number of banks that have a 9.12% stake reserved for foreign investors, according to Linh Nguyen, from Saigon Securities Research.

In order to raise capital by issuing shares, Vietcombank originally expected to complete the transfer of a 7.7% stake to GIC in 2016. However, the deal was not approved due to share price disagreements. Hanoi wanted to sell the issuance based on market prices but not lower than the valuation price.

Vietcombank shares closed at 71,400 dong ($3.14) on Friday, having doubled in value since the end of 2016.

Pham Thi To Tam, an analyst at KIS Vietnam, a subsidiary of Korea Investment & Securities Co, said Vietcombank's asset quality remained healthy, having reduced its 2017 non-performing loans ratio to 1.13%, the lowest in the sector, and with loan-loss coverage at 130%, the highest among its peers.

Vietcombank has sold its shares in other local financial institutions to reduce its risk of cross-ownership. Many local peers in the banking sector are still weighed down by non-performing loans. Vietcombank also plans to divest its investment in Vietnam Airlines this year, from which it expects to book a good profit. Meanwhile, the lender is making a big push to promote retail and individual lending, which accounted for 32.7% of total lending in 2017, up from 25.3% in 2016. Retail loans carry higher earning yields.

Other banks in Vietnam are also seeking foreign investors. The Bank for Investment and Development of Vietnam, one of the three biggest state-owned banks, has considered selling a stake of up to 30% to foreign investors, with South Korean and Japanese banks reportedly interested.

Orient Commercial Bank last year signed a comprehensive cooperation agreement with South Korea's Daegu bank, preparing for further cooperation in the future, while LienVietPostBank is offering a stake of more than 10% to oversea buyers.

Vietnam Prosperity Bank sold a 23% stake to 100 foreign investors last year and might sell more.

Meanwhile, Vietnam's authorities are seeking foreign buyers for the two nationalized lenders, Ocean Commercial Joint Stock Bank and One Member Limited Liability Global Petroleum Bank.

Established in 1963, Vietcombank was originally the foreign currency department of the State Bank of Vietnam. It was spun off from the state bank to become the first and only bank in Vietnam at the time that specialized in foreign-related transactions.

Vietnam's Ministry of Finance is expected to keep a large part of its huge deposit at the lender in the coming years. Its big deposits mean Vietcombank has an advantage over its peers in the lending business, especially in light of Hanoi's recent order that banks cut lending rates to support economic growth.

For 2017 Vietcombank reported year-on-year pre-tax profit growth of 32.2% to 11.3 trillion dong, surpassing its target of 9.2 trillion dong. The positive results were driven by a strong growth in funds raised from customers and credit issuance, which increased by 21% and 17.2% respectively from the previous year. 

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