Banks start to look offshore

Orient Commercial Joint Stock Bank (OCB) - illustration photo

The Orient Commercial Joint Stock Bank (OCB) is looking for government approval to continue selling stocks to its foreign strategic partner France-based BNP Paribas in a bid to hike its charter capital from current VND2.6 trillion ($125.6 million) to VND3 trillion ($145 million) in 2011.

BNP Paribas currently holds a 15 per cent stake at OCB and will reach 20 per cent if the deal is green-lighted by the Vietnamese government.

Similarly, Southern Bank also plans to lift its charter capital from VND3 trillion to VND4 trillion ($193.2 million) within 2011. To achieve the target, the bank wanted to sell more stock to its strategic partner Singapore-based United Overseas Bank (UOB) to raise the latter’s stake at the bank from current 15 per cent to 20 per cent.

Accordingly, it will sell to UOB over 16 million shares (equal to more than VND163.4 billion or $7.9 million based on the share par value) for over VND203.8 billion ($9.8 million) conforming to the stock purchase contract signed between Southern Bank and UOB on January 25, 2007.

The bank submitted relevant record on proposed further stake sale to UOB to the State Bank in 2010 for approval.

After selling 15 per cent stake to Singapore-based Temasek Holding to hike its charter capital to VND3 trillion in 2010, Mekong Bank submitted to State Bank a plan to raise the foreign partner stake in the bank from current 15 per cent to 20 per cent.

Under current regulations, banks need to get the nod from the State Bank and the government to hike the foreign partner share from 10-15 to 20 per cent.

Until present, there are only three banks in the local banking system got the thumbs-up from relevant competent bodies to lift the foreign partner share from 15 per cent to 20 per cent. They are Techcombank which sold 20 per cent stake to HSBC, ABBank selling stock to Malaysia-based Maybank and SeaBank selling stock to France-based Societe Generale.

Credit Suisse is consulting with Vietcombank (VCB) about selling a 20 per cent stake to foreign partners. This Swiss investment bank used to act as the consultant in VCB’s proposed sale of stock to a foreign strategic partner in 2007 but the deal later dropped due to VCB’s costly share price.

Lately, another state-owned Vietinbank (CTG) sold 10 per cent stake to IFC and plans to sell additional 15 per cent stake to Canada-based Bank of Nova Scotia.

More than 10 foreign banks reportedly became strategic partners of local banks.

Vietnam’s financial market is lucrative to foreign investors, according to a senior bank executive. Therefore, many foreign players willingly became local banks’ strategic partners through stock purchases. However, unlike some previous years local banks are now more prudent with the decision to partner with foreign strategic players partly due to low stock valuations.