VietNamNet Bridge – International Finance Corporation (IFC), a member of the World Bank Group, will likely invest US$50 million in the local lender An Binh Commercial Bank (ABBank), the World Bank’s private sector financial arm said on its website.

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In the statement, IFC said that the investment project is meant to forge a long term partnership between IFC and ABBank by providing long term financing to the bank structured both as senior and convertible debt instruments. ABBank is among proposed investments of IFC disclosed recently.

The investment will comprise a quasi-equity investment of up to US$50 million, which will allow the bank to maintain a healthy capital adequacy ratio while growing its loan portfolio. A US$25 million loan will be earmarked to support climate change initiatives and enhance financing for eligible projects in the energy efficiency and cleaner production.

Quasi-equity is a specialized form of private equity, characterized chiefly by use of subordinated debt, or preferred stock with an equity kicker.

“This project fits well with the IFC financial markets strategy for Vietnam and is in line with the World Bank Group’s efforts to use market mechanisms to mitigate the impact of climate change in Vietnam,” said IFC.

An executive from ABBank said the two sides are in talks over the investment. Besides, the bank has cooperated with IFC in two programs, one on consulting to develop small and medium enterprises, and the other on financing enterprises who commit to protect environment and save energy.

IFC has also pledged to support the bank in technology, customer consulting, and enhancing the bank’s corporate governance.

At this time, ABBank has chartered capital of VND3.48 trillion and expects to increase it to VND3.83 trillion by the end of this year. Two main institutional shareholders of the bank are Electricity of Vietnam (EVN) with a 24.25% stake and Maybank of Malaysia with 20%.

As of end-September this year, ABBank had total assets of VND36.26 trillion and outstanding loans of VND17.96 trillion. The bank obtained VND546.2 billion in pre-tax profits in the January-September period, almost doubling that in the year-ago period.

IFC also plans to invest in Vietnam Bank for Industry and Trade (VietinBank). According to information on its website, the investment is expected to comprise up to US$186 million in equity for an ownership of 10%, and US$125 million in subordinated debt through IFC Capitalization Fund.

IFC is the largest global development institution focused on the private sector in developing countries. It creates opportunities for people to escape poverty and improve their lives by providing financing to help businesses employ more people and supply essential services, by mobilizing capital from others, and by delivering advisory services to ensure sustainable development. Its new investments climbed to US$18 billion in the fiscal year 2010.

VietNamNet/SGT