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Vietnam starts next phase of bank reform with TPBank listing

Nine more in pipeline this year as country seeks foreign investors

A Vietnamese flag flies atop the State Bank building near the offices of Vietcombank and Bank for Investment and Development of Vietnam in central Hanoi.   © Reuters

HO CHI MINH CITY -- Tien Phong Commercial Joint Stock Bank, or TPBank, will debut on Vietnam's main stock exchange on April 19, the first of 10 domestic banks scheduled to list in 2018.

Out of the 31 lenders ordered by the government to list, 17 banks, including TPBank, have still to do so. The State Bank of Vietnam has told them to meet Basel II international bank capital rules by the end of 2020.

TPBank will list 555 million shares at an offer price of 32,000 dong ($1.40) each on the Ho Chi Minh City Stock Exchange. The lender has raised its foreign ownership limit to 30% ahead of the offering.

Vietnam plans to list and divest nine more state-owned banks this year, including Vietnam Technological and Commercial Bank, also known as Techcombank, Orient Commercial Bank and Maritime Bank. Hanoi has ordered all state-owned companies, especially the 31 banks, to list their shares one year after privatization as part of an effort to modernize its economy.

Vietnam International Bank, LienViet Post and KienLong Bank, which are seeking foreign partners, will also move from secondary to main bourses this year.

Hanoi set a 2016 deadline for banks to go public. But few met that target, given the unfavorable investment environment and problems in restructuring. The Vietnamese banking system has undergone huge changes and cleaned up nonperforming loans since 2012, reducing the number of lenders to 31 from more than 40.

The latest measures to restructure lending institutions, which took effect on Jan. 15, include the introduction of a bankruptcy process, marking the first time Vietnam has allowed this practice in the industry.

In 2016, the central bank urged banks to meet the Basel II standards by January 2020. The minimum capital ratio for commercial banks under Vietnam's own accounting standard is now more than 9%, but this is much lower than for other countries in the region, which have already applied Basel II and the more stringent Basel III.

This gap has prompted a rush among Vietnamese banks to seek foreign strategic investors and issue more shares to raise needed capital.

Market observers say the remaining 17 banks will have trouble attracting investors, as they are mostly small or midsized institutions with weak capital structures compared to the 14 banks that have already completed their listings.

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

These bigger institutions include Joint Stock Commercial Bank for Foreign Trade of Vietnam, also known as Vietcombank, Bank for Investment and Development of Vietnam, Military Commercial Bank, Asia Commercial Bank and Vietnam Prosperity Bank. Since the laggard banks suffer from nonperforming loans, they need to tap the capital markets or find strategic partners to bolster their capital.

Vietnam's government fund, the State Capital Investment Corporation, is seeking direct buyers for its holding in Maritime Bank, after canceling public auctions in October 2016 and March 2018 for lack of bidders. Ho Chi Minh City also expects to divest a 65% stake in SaigonBank, while Petrolimex Group Commercial Bank will on April 21 ask shareholders to approve its merger with another bank following execution of a reform plan.

Hanoi is also in talks with potential partners to sell major stakes in three banks that were nationalized in 2015. They include Ocean Bank, the lender at the center of corruption and embezzlement trials that led to an 18-year prison sentence for former Communist Party Politburo member Dinh La Thang, and a life sentence and a death sentence for two other bankers.

Vietnamese banking expert Can Van Luc said it will not be easy for all 31 lenders to meet the deadline, but state policies and the benefits of listing are encouraging more unlisted lenders to speed up reforms ahead of the 2020 target.

Hanoi is desperately seeking more funding for infrastructure development and economic growth. The socialist country has embraced the stock market as an efficient channel to raise funds and improve transparency in corporate governance.

The government is likely to be flexible in supporting weaker lenders to restructure and list at the right time, which benefits both the state and shareholders, Can Van Luc added.

(Nikkei)

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