Is European capital targeting Vietnam’s banks?
JP Morgan says Vietnam’s banks are an outstanding investment opportunity in Southeast Asia, while a report from Bao Viet Securities says the banking sector is very promising.
The Ministry of Planning and Investment (MPI) has released its second report with updates about the impact of Covid-19 on Vietnam’s socio-economic development.
The report cited international institutions as saying that the decline of the world’s economy will be worsened by Covid-19. The losses may be 3-4 times higher than the period affected by SARS, reaching $160 billion.
In such conditions, many of Vietnam’s business fields will be seriously affected, including services, trade, industrial production and construction. In the short term, agriculture, transport, tourism and hospitality have suffered the most.
|In such conditions, many of Vietnam’s business fields will be seriously affected, including services, trade, industrial production and construction. In the short term, agriculture, transport, tourism and hospitality have suffered the most.|
As for the banking sector, according to the credit department of the State Bank of Vietnam, VND926 trillion worth of outstanding loans will be affected by Covid-19.
Vietcombank CEO Pham Quang Dung said the epidemic may affect half of all of all of Vietnam’s goods, thus affecting enterprises’ solvency.
In January, large banks predicted that their profit growth rates in 2020 would be about 10 percent, lower than the 15 percent of 2019.
However, analysts said the signing of FTAs, including EVFTA, will provide a ‘guarantee card’ for Vietnam’s economy in the post-Covid-19 period.
They said EVFTA would not only make it easier for Vietnam’s goods to penetrate the European market, but also help bring foreign investors to Vietnam’s commercial banks. This includes investment banks such as Deutsche Bank and Norges Bank.
Five years after EVFTA takes effect, foreign investors will be able to hold up to 49 percent of shares in two Vietnamese joint stock banks, except BIDV, VietinBank, Vietcombank and Agribank, in which the State still holds the controlling stake.
“When the foreign ownership ratio ceiling is lifted, targeted banks will have the opportunities to access big capital and expand credit activities, especially when the LDR (loan to deposit ratio) is limited at 85 percent as stipulated in Circular 22/2019,” said the report by Vietnam Investment Securities.
Military Bank, Techcombank, VP Bank and ACB have the best profits among joint stock banks, which could be targets for investors. Meanwhile, smaller banks, including SHB, TPBank, HDBank, VIB and LienViet Post Bank are thirsty for capital and ready for private offerings to foreign shareholders.
Experts, however, cannot see the motivation for European bankers to pour capital directly into Vietnam’s banks. They still believe that EVFTA will make more foreign indirect investment (FII) in Vietnam’s securities, including bank shares.
“In the immediate time, EVFTA will open opportunities for Vietnamese banks to attract FII capital flows from the EU. Through investment funds, capital inflows from the EU into Vietnam's stock market may increase,” said Le Xuan Nghia, a respected banking expert.
Many banks have adjusted business plans and set lower business targets as businesses, or bank clients, have been hit hard by Covid-19.
To encourage customers to deposit money online amid the COVID-19 pandemic, many banks have raised interest rates for online savings by up to 1.4 per cent higher than over-the-counter deposits.