Since last year there has been a churn in the banking sector with some foreign investors selling their stakes in local banks and others buying in.

In December Ho Chi Minh Development Joint Stock Commercial Bank (HDBank) had sold stakes to more than 76 foreign investors before listing.— Photo ndh.vn

France’s BNP Paribas, HSBC and Australia’s Commonwealth Bank have been among those pulling out.

ANZ sold its retail banking division to Korea’s Shinhan Bank and Standard Chartered Bank sold its entire 8.75 per cent stake in Asia Commercial Bank.

Analysts said foreign banks are merely pulling out to invest in more profitable markets.

Some pointed out that Asian banks which enter Vietnam seem to be more successful than their western counterparts. They attributed this to their better understanding of the local market and business culture.

But even in the case of western funds, the flow is not one-way: Just this month Vietnam Technological and Commercial Joint Stock Bank (Techcombank) revealed it is selling stakes worth over US$370 million to US private equity firm Warburg Pincus.

In December Ho Chi Minh Development Joint Stock Commercial Bank (HDBank) had sold stakes to more than 76 foreign investors before listing.

The investors include some familiar names like VinaCapital, Dragon Capital, Deutsche Bank AG, JPMorgan Vietnam Opportunities Fund and financial institutions like CAM Bank (Japan), RWC Frontier Markets Opportunity Master Fund (UK), Macquarie Bank (Australia), and Charlemagne (UK).

HDBank’s partner in the consumer finance division, Credit Saison (Japan), also bought a stake.

In all investors paid $300 million for a 21.5 per cent stake in HDBank.

Finnish independent fund management company PYN Fund Management recently completed acquisition of a 4.99 per cent stake in Tiền Phong Commercial Joint Stock Bank (TPBank) for $40 million, marking its largest investment yet in Vietnam.

With a total portfolio value of 417 million euros, PYN is now the third largest foreign investment fund in Vietnam.

South-Korean based Hana Financial Group has acquired a stake in the Bank for Investment and Development of Vietnam (BIDV).

The banking sector is at an historic point now, with a cleaning up of books well under way. The real estate market is booming, meaning banks’ bad debts are being settled increasingly and their revenues are increasing.

But for analysts the most important factor is that the Government is forcing banks to meet Basel II standards.

They said foreign investors recognise the potential of Vietnam’s financial market, especially on mobile platforms, since the country has 53 million mobile subscribers and 40 million users.

The Government is making policy changes that would help the industry overcome its limitations in technology, capital and management, making foreign investors feel secure.

While foreign investors would like to woo Vietnamese banks, they are hamstrung by the fact that most of the latter have reached or are close to reaching foreign ownership caps.

Vietnamese law allows maximum ownership of a bank by a single foreign investor of 20 per cent and combined ownership by foreign entities of 30 per cent.

Based on these numbers, only a few banks remain below the threshold, most of them still in the process of restructuring, including SCB, BacA Bank, VietABank, and Sacombank.

Many lenders have suggested that the State Bank of Vietnam should increase the foreign ownership caps to 35-40 per cent in case of State-owned banks and 49-51 per cent in case of private banks.

Foreign investors want the ratio to be increased to 50 per cent or even 65 per cent.    

VNS