While foreign ownership in some Vietnamese private banks has hit the regulated cap of 30%, others still have a lot of room for foreign investors to get in.
Data from the Securities Depository Center shows that about half of the 31 Vietnamese joint stock banks have foreign ownership exceeding 15%.
Of these, seven banks already hit the cap or near it, namely ACB, MB, MSB, VIB, OCB, Techcombank and TPBank. These lenders have high profit growth rates and profitability.
Others have locked their foreign ownership levels lower, including MB (23.23%), Techcombank (22.47%), OCB (22%), and VIB (20.5%), respectively.
Foreign investors have high interest in buying into these banks as typically seen in the case of VPBank. On March 4, when VPBank raised its foreign ownership limit to 17.5% from 15%, foreign investors recorded net buying of more than 23 million shares, pushing the stock’s price up sharply.
On the contrary, several Vietnamese banks have very low or zero foreign ownership ratios such as VietCapital Bank, Kien Long Bank, Lien Viet Post Bank, SHB, SeABank, Bac A Bank, Viet A Bank, and VietBank.
Some of them lock the cap at low levels in order to offer stakes to future strategic partners, while others do so to minimize foreign investors’ influence on their share prices and shareholder structure.
SeABank, Lien Viet Post Bank and VietCapital Bank keep the cap at 5% of their chartered capital, while the figure at PB Bank is 2%.
According the government’s Decree No.01/2014/ND-CP on foreign investors’ purchase of Vietnamese credit institution shares, the foreign ownership ratio must not exceed 5% of the charter capital for an individual and 15% for an institution. The aggregate foreign ownership is capped at 30%.
Generally, banking experts are of the view that foreign investors’ participation in the local banking system in the past years has created positive changes in finance, technology, and governance, bringing Vietnamese banks closer to international practices and standards.
Can Van Luc, chief economist at BIDV bank, said the foreign ownership limit should be lifted as soon as possible as Vietnamese banks have great demand for equity hikes to meet Basel II and Basel III requirements, especially as their capital adequacy ratio (CAR) is lower than regional peers.
Nguyen Quoc Hung, General Secretary of the Vietnam Bankers Association (VNBA), noted that a higher cap will attract more capital from foreign investors, help commercial banks increase their capital, improve financial capacity and competitiveness, and better deal with bad debt.
But he argues that the ownership limit for different groups of banks should be different, depending on the State Bank of Vietnam’s classification. Those creditors that already fulfill Basel II requirements and strive to meet Basel III rules should see the foreign ownership level higher than 30%.
The government’s Resolution 22/NQ-CP dated July 2, 2021 requires the state ownership at banks where the state currently holds the majority stake like Vietcombank, Vietinbank and BIDV to be at least 65% of the total shares with voting rights in the period 2021-2025.
Brokerage house Viet Capital Securities (VCSC) said they do not expect any hike in the foreign ownership cap at these banks in the short term. Instead, VCSC reckons a few private banks would likely be allowed to lift up their own caps.
Under the EU-Vietnam Free Trade Agreement (EVFTA), within 5 years from the effective date of August 1, 2020, Vietnam commits to allow two European financial organisations to own up to a 49% stake in two Vietnamese banks, not applicable to the nation’s Big 4 - BIDV, Vietinbank, Vietcombank and Agribank, where the state is the majority shareholder.
VCSC noted that the clearest candidate for this commitment is Sacombank. The reason is currently 32.5% of the private bank’s existing shares are being held as collateral for an unpaid debt that has been transferred to the state-owned Vietnam Asset Management Company (VAMC).
VCSC said selling all of those shares one time would bring in the highest value to VAMC, and because the shares exceed the current 30% cap, such selling must be a special case. It might serve that EVFTA commitment.
VCSC does not see CB Bank, GP Bank and Ocean Bank as clear candidates. The central bank previously acquired those extremely weak banks at zero Vietnamese dong. Under the State Bank’s Circular 38/2014/NHNN, foreign investors can buy a more than 30% stake of these banks given government approval, but there are yet to be any buyers since then.