In late 2017, share sales by HDBank and VPBank strongly drew attention from international organizations with the bidding volume much higher than that offered.

Successful stories

Customers transact at a branch of HDBank

According to Fitch Ratings, Vietnamese banks were at the lowest rank in Asia at the end of 2016, suggesting numerous problems such as overall structure, bad debt and especially poor financial capability. Meanwhile, the banking system was going to pilot capital and risk management following Basel II standards.

An article posted on Bloomberg in September 2017 echoed the same viewpoint, saying that capital shortage was the biggest challenge of the banking network. As bad debt figures remained vague, the problem was expected to be much more critical than that written in financial reports.

However, the challenges gave banks an opportunity to speed up capital mobilization, including those from foreign investors. For long-vision players, Vietnamese banks were among feasible destinations in Asia as the local economy and the property market was regaining strength. Many banks were still struggling with bad debts but they showed clear signs of recovery. Notably, credit growth – an indicator of healthy operation – started rising again, said the article.

Mammoth deals

After a long time since the banking sector started its general restructuring process in 2008, banks have made large initial public offerings (IPOs) generating hundreds of millions of U.S. dollar.

Recently, HDBank mobilized US$300 million from foreigners, marking the second biggest deal in the industry only after the sale of Vietcombank, which raised over US$460 million in 2007. The bank’s IPO attracted global leading institutions such as Credit Saison (Japan), Deutsche Bank AG (Germany), JPMorgan Vietnam Opportunities Fund, CAM Bank (Japan), Charlemagne (UK), Dragon Capital, VinaCapital, Macquarie Bank (Australia) and PYN Elite.

Earlier, VPBank successfully mobilized US$250 million by selling shares in late May. According to the consulting unit, the bidding value of the IPO reached over US$1.2 billion.

The two successful IPOs have given a boost to Vietnamese equities, sending up bank share prices to a new high. For instance, foreigners offered to buy HDBank shares at up to VND32,000 each at its IPO as they expected its price to keep soaring after the listing on the Hochiminh Stock Exchange.

Uneven playground

The successful IPOs by HDBank and VPBank have marked the strong recovery of the banking sector, but not all banks are moving on smoothly with their capital mobilization schemes. In fact, even the four biggest banks in Vietnam are struggling with tier-1 capital increase.

Over the past year, Vietcombank has yet to solve obstacles in share sales to foreigners, though it did reach interim agreement with GIC for the transaction of nearly 306 million shares, or a 7.7% stake, in August 2016. GIC offered to buy the shares at around US$400 million, much lower than the market value at that time at around US$640 million.

BIDV, the leading bank in terms of total assets, are also seeking a way out as its capital adequacy ratio (CAR) is approaching a dangerous limit. BIDV has mentioned a South Korean partner but it may not complete the deal in the near future.

For VPBank and HDBank, the key for success is the spacious foreign room. Meanwhile, large banks such as Vietinbank have seen foreign room almost filled up, leaving a just a modest ownership for foreign investors. In addition, HDBank is a shining star with the total assets of VND180,816 billion. It expects to obtain VND2.4 trillion in 2017, up 130% versus the previous year.

Compared to 2011, its figures such as total assets, capital, mobilization and credit had made significant growth rates at end of the 2016. Partnered with large firms such as Vietjet Air, Vinamilk and HDSaison, HDBank is predicted to make robust growth in the next five years.

SGT