Banks open to welcome foreign capital

10-Apr-2021 Intellasia | Thoi bao Ngan hang | 5:02 AM Print This Post

The need to raise capital to improve financial capacity is making banks to look for foreign capital, particularly when the stock market is flourishing and bank stocks are attracting investors.

According to financial and banking experts, by holding nearly 50 percent of the credit market share of the whole industry, if these banks cannot raise sufficient capital, some consequences can occur, such as limiting the capital supplied to the economy, etc. On the contrary, if these institutions have abundant capital, the opportunity to further reduce interest rates, although the rates have reached record low levels, may get better.

One of the capital raising solutions chosen by many banks is calling for foreign capital.

Shareholders of Viet Capital Commercial Joint Stock Bank (VietCapitalBank) have approved the plan to issue additional shares worth nearly one trillion dong in the first quarter (Q1) of 2021. At the same time, the bank has also closed the list of shareholders for collecting written opinions to authorise the Board of directors (BOD) to make decision on the foreign ownership rate which is maximum at 30 percent in order to attract foreign capital, increase capital, and improve financial capacity and competitiveness.

Nam A Commercial Joint Stock Bank (NamABank) is also planning to raise charter capital to seven trillion dong, including an issuance of 57 million shares (equivalent to 570 billion dong) to pay dividends at the rate of 12.4878 percent and a private placement of 143 million shares (equivalent to 1.430 trillion dong).

In the above capital increasing plan, NamABank will offer shares to foreign investors at the prescribed rate. In addition, NamABank is also completing the documents to shift the share listing to HCM City Stock Exchange (HoSE) instead of trading on the Unlisted Public Company Market (UPCoM) at around 14,200 dong per share.

For National Citizen Commercial Joint Stock Bank (NCB), the bank plans to sell capital to foreign strategic investors and this plan has been approved by shareholders since 2017. However, according to NCB’s BOD, the bank will not complete the plan at all costs, but base on the set criteria to select the right partner.

Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank), Saigon Commercial Joint Stock Bank (SCB), etc. also said that they continue to improve their financial capacity and competitiveness. In particular, SCB has submitted to shareholders to approve the plan to increase charter capital by five trillion dong, bringing the charter capital from 15.231 trillion dong to 20.231 trillion dong.

Many banks of Vietnam, after the wave of foreign divestments in the past, also have available room for international strategic partners. For example, Southeast Asia Commercial Joint Stock Bank (SeABank) implemented its listing with almost an empty foreign ownership.

Numerous banks are present on the HoSE and UPCoM such as Bao Viet commercial Joint Stock Bank (BaoVietBank), Viet A Commercial Joint Stock Bank (VietABank), NamABank, Bac A Commercial Joint Stock Bank (BacABank), etc. are also in the same situation. For Orient Commercial Joint Stock Bank (OCB), despite having a Japanese partner, still have available foreign ownership room for a new release to find foreign partners.

Being a country that is said to be successful in containing Covid-19 and have soon resumed economic activities, Vietnam achieved impressive positive growth in 2020. The economic bright spots have made Vietnam particularly attractive in the eyes of foreign investors.

Jochen Steinbuch, director of DEG Asia Pacific region, said that Vietnam is considered an attractive destination for foreign investors when its economy is believed to be least affected by Covid-19.

“Thanks to a young population with an expanding middle class, the demand for financial and banking services in Vietnam is high,” Jochen Steinbuch emphasized.

Talking about the potential of Vietnam’s stock market in 2021, Nhu Dinh Hoa — general director of Bao Viet Securities Joint Stock Company (BVSC) — said that in the wave of foreign capital flowing into emerging markets, Vietnam — an emerging economy — is forecasted to attract the attention of foreign cash slows in 2021.

This expectation not only comes from the stable macroeconomic background, positive medium and long-term growth prospects, but also comes from attractive valuation of Vietnam’s stock market. Although the current Price to Earning (P/E) of the VN Index has surpassed the five-year average P/E of the index itself, is still attractive compared to other markets in the region.

Experts said that the prosperity of the stock market, especially the attraction of bank stocks, is one of the main factors that stimulates banks to expand their plan to call for foreign capital. Meanwhile, many banks still have full ownership room available for foreign investors.

In addition, under the provisions of the Vietnam — EU Free Trade Agreement (EVFTA), European banks are allowed to increase their shareholding rate in two Vietnamese banks to up to 49 percent without having to wait for the decision to loosen the ownership room. That creates the condition for foreign capital to flow into Vietnamese banks.

 

Category: Finance, Vietnam

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