BIDV starts strategic overseas negotiations

The bid to attract strategic foreign partners has been approved during last year’s meeting, when shareholders agreed to raise the share volume held by foreigners to 30 per cent in total.

According to BIDV chairman Tran Bac Ha, throughout 2014 the management board has held various discussions with banks and funds from abroad regarding investment opportunities at BIDV.

“A number of large financial institutions have expressed their strong interest in BIDV and wanted to become either strategic partners or financial investors,” Ha said.

The management board further disclosed that they are planning to narrow down the current six to seven potential investors to only two in order to make cooperation more substantial. Specifically, the bank intends to sell 15 per cent of its stakes to a strategic investor and 10 per cent to a financial investor. The total amount of shares owned by foreigners will thus be 25 per cent, still below the 30 per cent cap set by the State Bank of Vietnam.

If conditions are favourable, all shares for foreign investors will be issued via private placement.

Deputy CEO Tran Phuong, justified the bank’s active search for overseas partners by stating “The strategic foreign investment will help BIDV to increase its financial capacity and improve corporate governance to follow international standards and enhance transparency. The bank will also be able to upgrade its technology and boost services quality.”

As a result, the bank is looking for an overseas investor that shares its long-term strategy and business values.

However, during the general meeting the bank dismissed shareholder inquiries as to the specific timeline for the endeavour. The management board explained that its priorities at the moment lie with the domestic Mekong Housing Bank merger slated for May.

“The negotiations for foreign investors will proceed step by step,” said Ha. However, he did reveal that the bank plans would strive to reach final agreements at the end of this year or in early 2016.

The move has captured shareholders’ attention as BIDV currently has no strategic overseas partnerships. Foreign ownership at the bank currently stands at a modest 1.4 per cent of outstanding shares.

Meanwhile, a number of other Vietnamese banks have succeeded in creating their networks of strategic foreign partners, potentially securing a competitive edge. Prominent examples include Vietcombank, which has 15 per cent of its share volume owned by Mizuho Corporate Bank, and VietinBank, which has sold approximately 19.8 per cent of its stakes to The Bank of Tokyo – Mitsubishi UFJ.

BIDV is currently the second largest bank in Vietnam in terms of chartered capital, standing at VND28 trillion ($1.3 billion). For the first quarter of 2015, the bank recorded a pre-tax profit of VND1.8 trillion ($85.7 million), which amounts to 24.5 per cent of the annual target. Outstanding credits and deposits grew by 4.34 and 3 per cent respectively, compared to the beginning of 2015. The bad debt ratio is 2.1 per cent.