Foreign ownership limit drives investors from Vietnamese banks

January 15, 2018 | 16:30
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Over the past three years, numerous foreign investors made noteworthy divestments at Vietnam-based commercial banks due to the inconsiderable ownership. 

In early January, BNP Paribas, a strategic partner of Orient Commercial Bank (OTC: OCB), was reported to withdraw its entire investment capital from the Vietnam-based bank. To date, there has been no further details of the over 74 million shares the French banking group divested.

Andy Ho, managing director and CEO of VinaCapital Vietnam Opportunity Fund Limited, asserted, “The low foreign ownership limit at 20 per cent seemingly discouraged the majority of foreign investors from continuing to inject capital into Vietnam-based commercial banks due to limited ownership and the little say in the banks’ decision making process. As a result, increasing the foreign ownership limit in Vietnam-based commercial banks would be of great importance.”

In October 2017, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) announced a zero per cent foreign ownership followed by London-based HSBC’s capital divestment in July, as well as the request of the bank’s stakeholders to freeze foreign ownership at a temporary zero per cent in late August. Earlier, in mid-August, the British banking and financial firm was reported to divest a total of 172 million shares from Techcombank, according to newswire Vietnam News.

The low percentage of ownership leaves foreign investors no significant role in the decision making process at Vietnam-based banks

Le Anh Tuan, deputy CIO and head of research at Dragon Capital, highlighted, “Foreign shareholding limited at 20-30 per cent, requiring hundreds of millions of dollars from foreign investors, were one of the causes that drove foreign investors away from the country’s financial institutions. As long as this cap remains shy of 50 per cent, foreign investors will not be able to sway the decision making process or the banks’ boards of directors and they will not be capable of gaining any substantial investment benefits from a strategic partnership.”

In early 2015, Singapore’s Fullerton Financial Holding (FFH), a former strategic partner of Mekong Development Bank (OTC: MDB), sold all of its shares in the bank, equalling 20 per cent of its charter capital, before the merger with Maritime Bank (MSB) on March 31.

It was reported that the limited ownership as well as the partnership with a commercial bank vastly contributed to the firm’s decision of quitting the investment deal. To date, the Singapore-headquartered investment firm has not returned to Vietnamese banks.

On November 22, 2013, Overseas Chinese Banking Corporation (OCBC), a former strategic partner of Vietnam Prosperity Bank (VPBank), was reported to sell its entire stake at the Hanoi-based bank. Specifically, the Singapore-based banking firm sold a total of 85.83 million VPBank shares to Vietnamese investors. To add, the share transaction representing 14.88 per cent of VPBank’s shareholding left zero foreign ownership in the bank.

Positive equitisation and divestment outlook in 2018
Vietcombank’s $15 million back-to-back divestments
Banks announce upcoming divestment plans
Vietcombank divestment from Saigonbank and CFC greenlighted
Techcombank temporarily fixes foreign ownership limit at zero per cent

By By Van Linh

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