Banks rely on foreign partners to raise capital

OCB Bank - Illustration photo

However, it is not very clear if this move, aimed primarily at meeting new minimum charter capital requirements, will work for everyone.

Most of the applications that have been made in this regard are yet to be approved, and experts say the general gloomy economic outlook would make many foreign banks more cautious with their investments.

The Orient Joint Stock Commercial Bank (OCB) is awaiting approval from the Government to continue selling its shares to its current strategic partner – France 's BNP Paribas, in order to increase the latter's stake to 20 per cent.

Doing this will increase OCB's charter capital to the minimum VND3 trillion ($142.9 million) required by the State Bank of Vietnam. The deadline for all banks to meet the minimum charter capital requirement is the end of this year.

The Southern Joint Stock Commercial Bank plans to increase its charter capital to VND4 trillion  this year. It will issue more shares and offer them to its strategic shareholder, Singapore's United Overseas Bank (UOB), to raise latter's stake from the current 15 per cent to 20 per cent of its charter capital.

To make this happen, UOB will buy over 16.34 million shares for VND163.479 billion.

The Southern Bank had already submitted an application to the central bank last year to increase its charter capital, but it is yet to receive a reply.

After selling 15 per cent of its shares to Singapore's Temasek Holding, the Mekong Joint Stock Commercial Bank has raised its charter capital to VND3 trillion.

It has also reached an agreement with its foreign partner to expand the latter's stake to 20 per cent. However, this plan has not been approved yet by the government.

To date, only three banks have had their applications to allow strategic investors increase their stake: Techcombank, which sold a 20 per cent stake to the Hong Kong Shanghai Banking Corporation (HSBC); the ABBank, which sold 20 per cent to Malaysia 's Malayan Banking Berhad (Maybank); and the SeaABank which has made a similar sale to Europe 's Societe Generale Group.

A banking official said Vietnam's performances in the financial sector in recent years has been impressive, so many foreign investors were ready to spend money by acquiring strategic stakes in Vietnamese banks.

The state-run VietnamJoint Stock Commercial Bank for Industry and Trade (Vietinbank) recently sold 10 per cent of its shares to the International Financial Corporation (IFC) and is going to sell another 15 per cent to Canada-based Bank of Nova Scotia.

At present, more than 10 foreign banks have become strategic shareholders of domestic banks.

The official also said that foreign investors were likely to be more careful than in previous years because recent economic changes in the world have not been very positive.