Monday, 18 Dec 2017

Restructure banks: Opportunities for foreign investment

Updated at Tuesday, 29 Aug 2017, 16:40
The Hanoitimes - Banking system is experiencing the restructuring process. This is seen as a good opportunity for domestic and foreign investors.
Foreign investment waiting for positive signals

International Finance Corporation (IFC) is expected to grant an additional $150 million USD to ABBank in the form of a direct loan of up to $40 million USD an a syndicated/ parallel loan of up to 60 million USD. Besides, a loan of up to 50 million USD may be added. Not only IFC, Maybank (Malaysia) also owns up to 20% of ABBank’s capital. 
Customer services at Vietcombank - Hanoi Branch.
Customer services at Vietcombank - Hanoi Branch.
Last month, VPBank announced to have received a syndicated loan of 57 million USD from IFC (the principal loan can be converted into ordinary shares of VPBank during loan term). If allowed by shareholders, IFC will become VPBank’s foreign shareholder with a maximum holding of 5%. Earlier, at the time when VPBank was going to be listed on the stock exchange, foreign buyers’ bids were four times higher, including big names such as GIC, Deccan, Clermont, Dragon Capital, etc. 

At present, the number of Vietnamese banks not yet selling their shares to foreign investors is very low, such as Sai Gon Bank (SCB), BacA Bank, VietABank, Mr. Vo Tan Hoang Van, General Director of SCB, said that following the process of speeding up the restructuring phase, the bank planned to call for more foreign capital, with a rate exceeding 50%. This initiative has been approved on the policy. HD Bank is similar to SCB. Many foreign partners have also come to the bank, but leaders of this bank shared that everything is still in the negotiation process. Deals will be closed in the near future, or before and after the concentration of listing shares on the stock exchange.

With bank valued 0 VND such as Ocean bank, Deputy director of the Department for Management of Credit Institution and Banking Operation Licensing at the State Bank of Vietnam (SBV) confirmed that foreign banks have shown intention of taking part in restructuring effort. “foreign investors are very serious with this deal and want to conclude the deal. If this Merger & Acquisition (M&A) deal is successful, Vietnam will have an additional bank with 100% foreign capital” – Tho said. At present, SBV and the government are encouraging local and foreign investors to take part in this process to speed up the restructuring of banks under compulsory purchase.

General Director of VinaCapital Group – Mr. Don Lam said, the Vietnam banking system under the restructuring process have received great attention from foreign investors. Especially when the Vietnamese government allows investors to buy 100% shares of weak bank.
Customer services at VPBank - Hanoi Branch.
Customer services at VPBank - Hanoi Branch.
Attraction of Vietnamese banks

Economic expert – Dr. Le Xuan Nghia said:”in the context of global integration, it is easier for foreign banks to access Vietnamese market, however, it is time consuming and takes much effort, in order to have a large network such as local banks. As such, they are willing to spend from 3 trillion to 5 trillion VND (equivalent to 130 – 220 million USD) to purchase local banks”. 

One of the most attractive aspect of local banks are high potential development in the future, of which the wholesale and retail are not fully utilized. Vietnam’s population is 90 million, with the massive plan of infrastructure development in the coming time, capital will be in high demand, in turn creating opportunities for banks.

For example, in VPBank, its attraction is the commercial bank with the fastest growth rate in banking system, both in term of total asset, profit, credit growth in customer services, small and medium enterprises, micro enterprises and business households. Therefore, despite the bad debt is concentrated in trust loan with high risk, but it is the same for profit.

The most difficult things during the bank restructuring process are how to deal with bad debt, as foreign investors are still confused about the government’s policies and investment environment. However, according to Mr. Tho, the approval of resolution No. 42 on dealing with bad debt is an important milestone, and expected to be a new breakthrough. According to the resolution, with asset guarantee, a debt can no longer be considered bad debt.
Ngoc Thuy - Nguyen Anh
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