When it comes to mergers and acquisitions in the banking sector, scores of local banks have not only found it difficult to hold onto, but also find new foreign strategic partners as well, the Vietnam Investment Review reported on May 19. According to the newspaper, Sacombank, two years since bidding farewell to its international partners, has yet to find a new replacement.
Similarly, Ho Chi Minh City-based HD Bank, after failing to source partners last year, has pushed its plan to this year. VPBank, after parting with OCBC, planned to find a new partner, but has made little progress. Nguyen Manh Hung, an expert from the central bank’s Banking Strategy Institute, said there is a high demand for foreign investors from Vietnamese banks.
The current cap on foreign holdings in a Vietnamese bank is set at 30 percent, but the average stake as of last year was lower than 10 percent. Explaining why local banks have found it so hard to find strategic partners, senior financial expert Nguyen Chi Hieu said foreign banks were also hard hit by the global financial downturn and were also cautious about investing in Vietnamese banks during the sector’s previous boom phase and now resultant restructuring period.
However many other experts are of the view that foreign investors were mulling other options such as setting up independent operations rather than teaming up with local institutions. After divesting from Sacombank, ANZ scaled up its presence as a wholly foreign-owned bank in Vietnam by focusing on retail banking and services for local businesses.
HSBC, though yet to reveal whether it will divest from Techcombank, has more than doubled its chartered capital, from 3 trillion VND (142 million USD) to more than 7.5 trillion VND (357 million USD) to leverage its plan to expand throughout the country. Foreign banks are being increasingly cautious in their investment decisions.
Deputy director of the Central Institute for Economic Management Vo Tri Thanh said transparency was a key factor in attracting foreign investors. He said transparency must exist at all levels and banks must commit to it both in their reporting and operations.