Vietnam banks plan $7 billion share sales as economy heats up
Vietnamese banks are planning nearly $7 billion in share sales by the end of next year to meet capital demand from a fast-growing economy, with some foreign ownership limits raised to 49%. The capital-raising wave is Vietnam's largest ever by lenders, driven by Basel III transition and rapid credit growth. Sources and analysts say foreign investors are showing increased interest in expanding their stakes in the sector.
Stake sales attract existing investors and new ones, sources and analysts say Foreign ownership, offshore borrowing limits have been partly loosened Basel III transition and rapid credit growth are driving lenders' capital-raising plans By Francesco Guarascio and Phuong Nguyen HANOI, Oct 7 (Reuters) — Vietnamese banks are planning nearly $7 billion in share sales as the country's fast-growing economy fuels demand for capital, opening a window for foreign investors to expand in the tightly controlled sector.
Communist-run Vietnam, which reported growth of nearly 10% in the last quarter, has one of Asia's fastest-growing banking industries but access has been restricted, with cumulative foreign ownership capped at 30%, individual stakes limited to 20% and offshore borrowing subject to strict limits. But in recent months, top leader To Lam's drive to turbocharge economic growth with major infrastructure spending has ushered in a more open approach, as policymakers view larger foreign participation as necessary to meet growing credit demand amid a domestic funding squeeze. 1 billion and it could rise further.
Three local lenders have been allowed to increase their foreign ownership limits to 49%, while stock-market reforms secured Vietnam's upgrade to emerging status by index provider FTSE Russell last month. Separate plans to set up international financial centres also promise more foreign capital inflows. A couple of foreign lenders involved in equity talks with Vietnamese partners cited gains on their financial investments and greater access to the country's growing consumer market for products like insurance as reasons to expand there, according to two people familiar with the discussions who requested anonymity because the matter was private.
Vietnam is allowing more foreign capital into its banks as "it is beginning to rethink how its next phase of growth will be financed," said Quynh Nguyen, a finance lecturer at Hoa Sen University in Ho Chi Minh City. She cautioned, however, that the move was selective and did not amount to a wholesale liberalisation. Share Sales, Offshore Funding The share offers have increased foreign interest, "particularly from strategic investors who are already familiar with Vietnam and are now considering deeper exposure," Quynh said.
Japan's Sumitomo Mitsui Banking Corp (SMBC) is in talks with Vietnamese partner VPBank to raise its stake to 20% from 15% as VPBank seeks a private placement worth $560 million at current market prices, VPBank is allowed to raise its foreign ownership cap to 49%. 2 billion at current prices. Japan's Mizuho Bank, its current largest foreign investor with a 15% stake, "may potentially increase its holding," according to minutes from a Vietcombank shareholder meeting in April. Mizuho declined to comment.
4 billion, according to public disclosures. Its top foreign shareholder, South Korea's KEB Hana, did not participate in the first placement but is considering whether to participate in the new plan, a spokesperson said. "We see some opportunities among the smaller banks to score some tie-ups down the line, provided Vietnam can maintain its growth story," Fitch's Willie Tanoto said. 7% stake by the end of next year.
The private bank — linked to Vietnam's largest private airline Vietjet — does not have a large foreign investor and is allowed to raise its foreign ownership to 49%. 3 billion this year, according to FiinRatings, an S&P Global partner. The finance ministry is also considering an offshore sovereign bond sale that would be the country's first since 2014. Banks are also weighing offshore bonds while large municipalities may be able to tap international capital markets with debt offerings under new rules.
More Equity Sales? The equity sales have been driven by the need to bolster capital as Vietnam transitions to stricter global Basel III requirements by 2030. The need has become pressing because of rapid loan growth, which Moody's-backed VIS Rating said could further deteriorate loss-absorption buffers. The government's push for annual economic growth of at least 10% through 2030 is also fuelling the inflation of asset prices, particularly in the real estate sector, which accounts for roughly a quarter of all loans and where bad debts are rising quickly, according to an August internal report from the central bank.
Fitch said the capital-raising drive "is unlikely to materially improve most banks' capitalisation" because the fresh funds will be rapidly deployed into new lending. Yet those risks may also create new opportunities as "further large capital injections are likely to be needed in the coming years," Fitch said. com)