VIB eyes foreign ownership expansion to 30%

Vietnam's leading private bank VIB plans to lift its foreign ownership limit from 20.5% to 30%, the maximum level allowed by the law.

In a document seeking its shareholders' okay, the bank said a foreign ownership increase of up to 30% would offer "big chances" to both foreign investors and existing shareholders.

"It will help VIB seek more international cooperation, acquire experience, and apply governance standards and business models from financial institutions, further strengthening the bank's position as a leading retail bank in Vietnam in terms of both quality and scale," it wrote.

VIB now serves more than four million individual customers, and maintains a large and diversified shareholder structure, with more than 20,000 shareholders.

Of those, Commonwealth Bank of Australia (CBA) is the largest shareholder, holding about 20% of its charter capital since 2010. CBA is one of the biggest banks in the world, with a market capitalization of $122 billion.

Over the past 12 years, CBA as a foreign strategic investor has helped to build VIB into a branded bank in Vietnam in terms of quality and scale. VIB has become one of the first banks in Vietnam to successfully apply important standards like Basel I, Basel II and International Financial Reporting Standards (IFRS).

The VIB-CBA partnership over the past decade is considered a rare example of successful cooperation between a leading global bank and a domestic bank in the Vietnamese market.

VIB, listed on the Ho Chi Minh Stock Exchange (HoSE) as VIB, recorded a pre-tax profit of over VND8.7 trillion ($350.7 million) in the first 10 months of the year, up 44% year-on-year. Its return on equity (ROE) stood at 30% for three consecutive years.

Data from the Securities Depository Center as of early August this year showed that about half of the 31 Vietnamese joint stock banks have foreign ownership exceeding 15%.

Of these, seven banks already or nearly hit the cap, namely ACB, MB, MSB, VIB, OCB, Techcombank and TPBank. Others locked their foreign ownership levels lower, including MB (23.23%), Techcombank (22.47%), OCB (22%), and VIB (20.5%), respectively.

On the contrary, several Vietnamese banks had very low or zero foreign ownership ratios like VietCapital Bank, Kien Long Bank, Lien Viet Post Bank, SHB, SeABank, Bac A Bank, Viet A Bank, and VietBank.

Some locked the cap at low levels to offer stakes to future strategic partners, while others did so to minimize foreign investor influence on their share prices and shareholder structure.

According to the government’s Decree No.01/2014/ND-CP on foreign investor purchase of Vietnamese credit institution shares, 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%.

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 is lower than regional peers.