Japanese banks pump vast capital into Vietnam market

Japanese banks, both mega and smaller, have been channeling more investment into Vietnam, one of the world’s fastest expanding economies.

Keen to expand in Asia, Mitsubishi UFJ Financial Group Inc., Japan's biggest banking group, is making progress in entirely acquiring SHB Finance Co. Ltd. of Vietnamese lender Saigon-Hanoi Bank (SHB) through Thailand’s Bank of Ayudhya, where Mitsubishi UFJ is a major shareholder holding almost 77% by end-2021.

Ayudhya, often referred to as Krungsri, is a leading financial group in Thailand. Meanwhile, Hanoi-based SHB is maintaining its position among the top 5 largest private commercial banks in Vietnam.

The World Bank’s investment arm IFC signed a deal with SHB on March 21 to provide a $40 million loan – the first phase of an overall planned $120 million financing package, to help SHB provide more support for local enterprises and boost their participation in the global supply chain.

SHB chairman Do Quang Hien told the bank’s annual general meeting in Hanoi on Tuesday that Krungsri and his bank would complete legal procedures for the acquisition this month.

“Krungsri will pay SHB for a 50% stake next month, while the remaining 50% will be paid three years later,” he said.

Hien did not announce the full acquisition value because SHB, as the seller, is not allowed to disclose.

Krungsri, as the buyer, had earlier revealed it would spend 5.1 billion baht, equal to $156 million, on the deal. SHB’s Hien said Tuesday this number “is not wrong.”

Previously, Sumitomo Mitsui Banking Corp. (SMBC), another Japanese megabank, signed a deal on March 27 with major Vietnamese private lender VPBank to acquire a 15% stake for about $1.5 billion.

The deal made SMBC a strategic investor in Hanoi-based VPBank, which topped Vietnam's banking system in terms of charter capital after expanding it by 50% to VND67.43 trillion ($2.83 billion) in December. This put it far ahead of state-owned banks that had hitherto held the top slots.

Four days before the SMBC signing, Japan’s Mizuho Financial announced it had invested $125 million into Kredivo Holdings Ltd., a Southeast Asian digital financial services provider with operations in Vietnam and Indonesia. The investment is part of $270 million Kredivo raised in a series D round led by Mizuho Bank of Mizuho Financial.

The Japan Bank for International Cooperation (JBIC), another Japanese megabank, announced on March 29 that JBIC, Mizuho Bank, Joyo Bank, and Shiga Bank will provide funding totaling $300 million to renewable energy firms in Vietnam to support the country’s decarbonization efforts.

Vietnam is seeking to promote the development of renewable energy to support its carbon neutrality goal by 2050, and this funding will help the process. The four Japanese banks will provide funds via Vietcombank under a deal signed in Hanoi on the same day, with $165 million from JBIC.

“As Japan's policy-based financial institution, JBIC will continue to support global environmental preservation efforts in cooperation with local financial institutions by drawing on its various financial facilities and programs for structuring projects and by performing its risk-assuming function,” JBIC said.

The Vietnamese economy is expected to grow by 6.3% this year, the World Bank said in its April update. Meanwhile, the Asian Development Bank announced earlier this month it forecast this economy would expand by 6.5% this year and 6.8% in 2024, the highest in Southeast Asia in both years.

Meanwhile, Japan's growth is forecast at 1.6% for this year, according to the International Monetary Fund.