VPBank receives 10% deposit from Japan’s SMBC

VPBank, Vietnam’s largest bank by charter capital, has received a 10% deposit from Sumitomo Mitsui Banking Corp. (SMBC) in a deal to sell its 15% stake to the Japanese major bank, said VPBank chairman Ngo Chi Dung.

At the VPBank annual general shareholder meeting in Hanoi Tuesday, he said his bank had earlier signed the deal to transfer 1.19 billion shares equal to 15% of its charter capital to its Japanese strategic investor SMBC for about $1.5 billion.

“Once all legal procedures are completed in late July or early August, the strategic partner will continue to pay the rest,” he added.

At the meeting, VPBank shareholders also approved a target to earn over VND24 trillion ($1.02 billion) in pre-tax profit in 2023, up 13% year-on-year. Its total assets are expected to increase by 39% to VND877.46 trillion ($37.33 billion) this year.

Customer deposits and outstanding loans are estimated at VND518.2 trillion ($22 billion) and VND636 trillion ($27.06 billion), up 41% and 33%, respectively. The Hanoi-based lender also strives to keep bad debts at less than 3%.

VPBank's profit exceeded VND4 trillion ($170.23 million) in Q1/2023, or 20% of the year's target.

The bank will pay dividends to shareholders in cash at a rate of 10%, equivalent to VND7.9 trillion ($336.1 million). The yields are set to go to shareholders in Q2 and Q3/2023.

Regarding the possibility for VPBank to be among banks with the foreign ownership limit lifted, Dung said that it is one of four domestic banks participating in the restructuring of weak credit institutions, with two allowed to expand foreign ownership to 49%.

CEO Nguyen Duc Vinh said in 2023, VPBank still maintains strong growth in two strategic segments - retail and small- and medium-sized enterprises (SMEs), with expected rates of 40% and 35%.

“The bank will focus on large- and medium-sized enterprises, regarding this as a segment with great growth potential, along with foreign direct investment (FDI) businesses,” Vinh said.

VPBank aims to serve 300-600 FDI enterprises by the year-end, from the current figure of over 80, he said, adding that with the cooperation and support of SMBC, the bank is connecting with more than 3,000 Japanese firms operating in Vietnam.

Regarding bad debts and operations of VPBank SMBC Finance Co. Ltd, also known as FE Credit, Vinh said due to the impact of the Covid-19 pandemic and the real estate crisis in the country, some loans have become bad debts.

In Q1, the bank's bad debt increased sharply, from 2.19% at the end of 2022 to 2.6%. This ratio is estimated at 2.2% in 2023, pushing its risk provisions to VND11 trillion ($468 million).

With high bad debt and risk provisions, the financial services company is expected to incur losses in Q1 of this year. It will suspend lending and restructure its customer segments toward reducing high-risk ones, according to the CEO.

He said that VPBank now holds VND30 trillion ($1.27 billion) in corporate bonds, down VND5 trillion from the end of 2022. Of these, nearly 60% are issued by real estate firms but none make up 1% of VPBank's credit balance. The bank aims to reduce its corporate bonds by 50% by the end of the year.

At the meeting, shareholders also approved the offering of 30.2 million shares under the Employee Stock Ownership Plan in 2023; and the resignation of Nguyen Thi Mai Trinh, head of the bank’s supervisory board.