HO CHI MINH CITY -- The first Vietnamese bank granted government approval to sell a majority stake to a foreign investor is looking to attract an investment of at least US$700 million.
Saigon Joint Stock Commercial Bank, the fifth-largest by assets, said it is in talks to draw that investment by selling a controlling stake to a sole foreign investor. The funds will help strengthen its financial products and speed up the resolution of remaining bad debt.
Saigon Commercial Bank, or SCB, plans to sell more than half of the bank at par value through the issuance of new shares, chief executive officer Vo Tan Hoang Van said.
“We’re really looking for a partner who would not only put money into the bank but also has the same vision about this market,” Van said in an interview at the bank’s Ho Chi Minh City headquarters, adding that he wants an investor to help grow the bank. “More importantly, they need to help our clients to complete their real estate projects so that we can solve the bad debt issue in a shorter time.”
Prime Minister Nguyen Xuan Phuc said in a Bloomberg Television interview in January he plans to increase the government’s 30% cap on total foreign ownership in banks to hasten the overhaul of Vietnam’s banking system. He singled out Ocean Bank, taken over by the State Bank of Vietnam in 2015, as a weak institution the government is willing to sell immediately to a foreign investor.
The benchmark VN Index was little changed as of 10am in Ho Chi Minh City. Real estate and banking stocks were among the sectors that gained on the index.
Financial services companies have led gains in Vietnam stock market this year, rising 14%. Two out of six banks listed in the Ho Chi Minh City Stock Exchange rose today, with Bank for Foreign Trade of Vietnam JSC advancing 0.7% and the Vietnam Joint Stock Commercial Bank for Industry and Trade was up 0.3%.
Saigon Commercial Bank has been in talks with six investors, including banks, equity funds and insurance companies from Norway, Indonesia, Taiwan and China, Van said. An unnamed foreign investment fund earlier this year offered to buy a 15% stake, according to Van. The bank also expects intensifying negotiations with two potential investors from China and Indonesia.
The lender aims to submit its stake sale plan to the central bank for approval early next year and expects to close the deal in mid-2018, Van said. The bank plans to hire an international bank as a consultant, he said, adding that the prime minister must ultimately sign off on the deal.
The sale of a majority stake may also affect plans for a listing after 2019 when its restructuring process, which began in 2012, is completed, Van said.
Banking Reform
The government established the Vietnam Asset Management Company in 2013 to acquire bad bank loans, which has reduced bad-debt ratio to 2.46% of total loans at the end of 2016 from an estimated 7.8% at the end of 2012. The agency has collected just 50.2 trillion dong ($2.2 billion) of non-performing loans, or less than 18% of the total outstanding bad debt, since its establishment, Thoi Bao Kinh Te Vietnam reported March 20, citing data from VAMC.
“This is an important move to reform the banking system,” said Alan Pham, Ho Chi Minh City-based chief economist at VinaCapital Group, one of the nation’s biggest fund managers. “SCB can receive a capital infusion to improve its non-performing loan problem. Investors can provide SCB with advanced technology, risk management methods, derivatives trading capabilities and FX management.”
Still, Vietnam’s current regulations may make it difficult for overseas investors to acquire bank stakes, Van said.
Under Vietnam law, overseas banks, financial firms and financial leasing companies that seek to acquire 10% or more of a local credit institution’s charter capital must have total assets worth at least $10 billion. Other foreign investors must have registered capital of at least $1 billion during the year before applying to buy the stakes, according to the 2014 decree.
International banks are reducing investments in emerging countries’ banks due to new capital requirement management regulations under Basel III, Van said. Vietnam’s asset and registered capital requirements are “a barrier to foreign lenders who seek to invest in Vietnamese banks,” he added.
Saigon Commercial Bank, established with the 2012 merger of Saigon Joint Stock Commercial Bank, First Joint Stock Commercial Bank and Vietnam Tin Nghia Commercial Joint Stock Bank, slashed its bad debt ratio to 0.68% by the end of last year from 7.25% in 2012, the lender said at its April 18 shareholders’ meeting. The bank targets collecting 1.5 trillion dong in overdue loans this year.