Central bank may lift foreign ownership limit at three banks

The State Bank of Vietnam is mulling over lifting the foreign ownership limit at HDBank, MBBank and VPBank, said brokerage house Yuanta Securities Vietnam.

The trio might receive such a preference from the central bank as they have participated in restructuring some "weak" banks.

It is also part of the banking system's plan to raise equity to counter heavy leverage risks. The capital adequacy ratio (CAR) of Vietnam's banking system reached 11.7% in October 2022, above the 8% requirement under the Basel II risk management standards.

The broker added that the foreign ownership limit hike, if any, would not exceed the 49% threshold. "If the figure is increased to higher than 30%, to 35% for instance, it will help improve the capital buffer of those banks."

Under the government's Decree No.01/2014/ND-CP on foreign investors buying stakes in Vietnamese credit institutions, the foreign ownership ratio must not exceed 5% of charter capital for an individual and 15% for an institution. The aggregate foreign ownership is capped at 30%.

According to a draft decree released last December, Vietnamese banks that acquire or participate in restructuring "weak" banks can raise their foreign ownership ratio to 49%, higher than the current maximum level of 30%. The draft will amend Decree No.01.

Private bank VPBank plans to lift its current foreign ownership ratio of 20.5% to 30%, the highest allowed by law. In a document seeking its shareholders’ nod last year, the lender, listed on the Ho Chi Minh Stock Exchange (HoSE) as VPB, said a 30% ratio would offer “big chances” to both foreign investors and existing shareholders.

Yuanta said VPBank wants to sell 15% of its shares to foreign investors and the broker expects the deal to be completed in early 2023.

Vietcombank is looking to implement and finish its delayed-by-two-years plan of selling 6.5% of its chartered capital to strategic foreign investors in late 2023 or early 2024.

In October 2022, the central bank raised credit growth limits for four banks as an incentive as they had participated in restructuring some "weak" banks.

HDBank (HoSE: HDB) reportedly has supported Dong A Bank; MBBank (HoSE: MBB) has helped Ocean Bank, VPBank (HoSE: VPB) has assisted GPBank, and Vietcombank (HoSE: VCB) has aided Construction Bank (CBBank).

Credit growth this year is set at 14-15%, subject to adjustments according to actual developments, the State Bank of Vietnam said in a directive on goals for the banking sector in 2023.