South Korean and Japanese lenders with stakes in Vietnamese banks could be the biggest winners from the liberalisation of the country’s foreign ownership rules, given western lenders have retrenched from Vietnam, experts say.
The cap on foreign ownership for some domestic banks was increased from 30 per cent to 49 per cent, and took effect earlier this week. The increase will initially apply to MB Bank, HDBank and VPBank.
Jonathan Pincus, dean of the Fulbright School of Public Policy and Management at Fulbright University Vietnam, says South Korean banks are most likely to benefit from the change due to what he calls their “massive” existing presence in the country.
Shinhan Bank, Woori Bank and KEB Hana Bank all have branches in Vietnam, while Korea Development Bank was given approval by the State Bank of Vietnam to open a branch earlier this month. There are also more than 10,000 Korean businesses operating in Vietnam, according to the Korean Chamber of Commerce.
Pincus adds that HDBank is the most likely to go after support from a South Korean lender given it has a representative office in Seoul and is “aggressively” expanding in Vietnam.
Japanese banks, meanwhile, have been looking to Vietnam for several years in the face of low interest rates and stunted growth in their home market. Pincus says several Japanese banks already hold shares in Vietnamese lenders.
Indeed, SMBC has a 15 per cent stake in VPBank — which is lower than the ownership cap extension — and is the sole strategic foreign investor in the bank.
MUFG, meanwhile, currently holds 20 per cent of Vietinbank, Vietnam’s third-biggest bank by assets, while Mizuho holds 15 per cent of Vietcombank. Aozora Bank, the 32nd largest bank in Japan by assets, has a 15 per cent share in Vietnam’s OCB.
Nguyen Hung, CEO of TPBank, which currently has 22.96 per cent foreign ownership, told The Banker it is open to increasing foreign ownership. “An increase in foreign participation would further enhance TPBank’s financial capacity, corporate governance, and access to international best practices,” he says.
Foreign ownership in Vietnam was previously capped at 30 per cent, with the strategic stakes of many hovering between 15 per cent and 20 per cent. This, Pincus says, left foreign banks feeling frustrated by a lack of control and led a number of banks to divest.
HSBC, for example, stepped away from Techcombank in 2017, selling back the last of its 172mn shares. ANZ and Standard Chartered have also divested from banks, with Commonwealth Bank of Australia pulling the last of its shares out of Vietnam International Commercial Joint Stock Bank in March.
Although Suiwah Leung, economics professor at the Crawford School of Public Policy, the Australian National University, believes the foreign ownership changes will be positive, she says the new rules are still too conservative. She says foreign investment in other sectors is permitted up to 60 per cent of total capital. While there are some restrictions in place, this broadly covers sectors such as manufacturing, real estate and IT.
In order to attract foreign investors, Pincus says obstacles around credit growth targets, interest rate caps and the difficulty of introducing new product lines will need to be addressed.
AloJapan.com