The Bank for Foreign Trade of Vietnam (Vietcombank) has written to the State Bank of Vietnam (SBV) and the Government seeking approval for selling its shares to Singapore’s GIC Pte Ltd and Japan’s Mizuho Bank Ltd.

Under a memorandum of understanding signed between Vietcombank and GIC on August 29, the latter will acquire 305.81 million new shares, equivalent to a 7.73% stake in Vietcombank. Meanwhile, Mizuho Bank will buy 53.97 million shares to keep its ownership unchanged at 15% and remain the biggest private shareholder in Vietnam’s largest bank by market capitalization.

A senior official in the banking sector told the Daily that Vietcombank had found good partners and the share price offered by foreign investors is reasonable given the current market conditions in Vietnam and the region. The bank’s equity sale to foreign investors is now subject to regulatory approval.  

A source told the Daily that Vietcombank is expected to collect VND10.2 trillion (US$457.4 million) from the share sale. With 359.777 million shares issued for foreign partners, the price stands at an estimated VND28,350 a share, or VND39,274 a share before the lender’s cash dividend payments at 10% and its issuance of bonus shares at 35% to shareholders.

The price offered by foreign investors is 22% lower than Vietcombank’s closing price at VND50,500 per share on the HCMC bourse on September 8. GIC’s offered price is 3-fold higher than the local bank’s price-to-book ratio (P/B).

According to Credit Suisse, which is a broker and financial adviser to Vietcombank in the transaction, GIC’s offered price is high in comparison to those on world and regional markets.

Meanwhile, P/Bs of regional banks are lower than their stock prices, such as 1.6 times in the Philippines, 1.47 times in Thailand and 1.57 times in Pakistan.

Credit Suisse puts the price of Vietcombank shares at VND17,120-40,710 each based on different methods. It said GIC’s offered price at VND39,274 a share is the highest.

Since 2012, Vietnamese banks have been under pressure to increase capital to meet the Basel Capital Accord II (Basel II) standards.

Despite being controlling shareholders at a number of banks, the State cannot inject more money into the entities due to budget constraints. In addition, banks cannot find buyers if they issue shares for domestic investors.

A number of foreign shareholders are planning to sell stakes in domestic credit institutions.

VietinBank used to issue shares worth a combined VND15.46 trillion (20% stake) for foreign investors while BIDV has yet to find strategic foreign shareholders as wished.

In 2006, Vietcombank failed to sell shares to an American investor as authorities did not agree the price offered by the investor. Speaking to the Daily, an official of the Ministry of Finance said this was a big mistake.

In 2011, Vietcombank sold shares to Mizuho Bank Ltd at the price of VND34,000 each, 15.5% lower than GIC’s offered price at present.

GIC wants to deepen its presence in Vietnam following its investments in Masan and FPT. That is considered one of the reasons why it offers a high price for Vietcombank shares.

SGT