Offshore banks vie for first-off equity plays in local banks

It would appear that bank shares are drawing a great deal of attention of offshore investors. The report by the State Bank of Vietnam shows that at least 10 foreign financial institutions chiefly investment funds and foreign banks’ branches operating in Vietnam are planning to take equity stakes in local banks.
It is noteworthy that Saigon Thuong Tin Commercial Joint Stock (Sacombank), Asia Commercial Bank (ACB) and Vietnam Export-Import Joint Stock Commercial Bank (Eximbank) are the banks that foreign investors are most interested. According to these banks, they are urgently planning to list or issue their shares on the stock market with the aim to increase chartered capital.
Reportedly, the Hong Kong Shanghai Bank Corp (HSBC) and Australian and New Zealand Banking Group Ltd (ANZ) have decided to jump into the game to buy 10% of Sacombank shares. Meanwhile, Deutsche Bank also declared that it would financially invest in Eximbank. Though Eximbank has not yet made a final decision to sell its shares, finance specialists predicted that Deutsche Bank is considered the ‘heaviest’ candidate in this investment affair because Deutsche Bank has signed an agreement in principle to assist Eximbank to improve banking its technologies and the banking products and services quality.
Analysts said that offshore banks’ determination and great attempt to invest in local joint stock banks is very realistic and feasible when the amendments to the Law on Credit Institutions authorise foreign banks to buy up to 30%of shares of local credit institutions. Moreover, compared with listed companies, the performance effectiveness of banks such as Sacombank and ACB is much higher—and stable.
At present, three banks that have sold shares to foreigners—ACB, Sacombank and VPBank—but chiefly sold to and investment funds and institutional investors. No foreign bank has yet bought shares in a domestic bank.
To date, foreign banks have only established branches or representative offices. So, compared with local banks, the operation of foreign branches is limited by some regulations especially the credit protective policy by the government. However, these will be narrowed, gradually abolished and replaced by more appropriate ones in Vietnam to permit fully foreign-invested banks to establish and operate in Vietnam to conform with the commitments of the US-Vietnam Bilateral Trade Agreement and other international trade pacts.
The policy to permit fully foreign-invested banks to establish, operate or buy shares of local banks is considered the open door once for offshore banks to participate in the Vietnamese financial market. Particularly, the State Bank of Vietnam is going to issue a regulation on publishing information on local commercial banks, which also is more attractive to offshore banks in buying bank shares.
Local banks said that they are willing to accept the capital contribution by foreign banks or sell shares to them. Dang Van Thanh, chair of Sacombank’s board said that Sacombank would prioritise to sell 10% of shares to foreign banks.
Regarding the sale price of shares, according to local banks, the sale price of bank shares that will be sold to foreign banks must be higher than that of shares sold to local shareholders. The sale price level offered for foreign partners by joint stock banks is expected to be a premium two and a half to three times par.
The State Bank of Vietnam has again reaffirmed that it is determined to work with the State Securities Commission to have the first joint stock commercial banks to list on the stock market by the start of 2005. This news has heated the price of bank shares on the informal market even the shares of banks that have no intention to list such as Eximbank, Military Bank, Eastern Asia Bank, Phuong Nam Bank, VPBank and some other banks.

 

Category: Finance