Japanese financial behemoths extend SE Asia reach

April 05, 2023 | 08:00
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Three Japanese megabanks are doubling down on their emphasis on Vietnam’s finance and banking sector to experience rapid economic growth and leverage their investment portfolios across wider Southeast Asia.

Sumitomo Mitsui Financial Group (SMFG), through its banking arm Sumitomo Mitsui Banking Corporation (SMBC), last month inked an agreement to acquire a 15 per cent stake in Vietnamese lender VPBank.

Japanese financial behemoths extend SE Asia reach
VPBank has reached an agreement to sell 15% of shares to Sumitomo Mitsui Banking Corporation - Photo source: VPB

The deal, worth around $1.5 billion, is a record for the financial industry in Vietnam, surpassing the previous record set by VPBank itself.

Jun Ohta, CEO of SMBC, said that Vietnam was a crucial market for SMBC’s expansion plans. “Although the globe faces numerous uncertainties, we believe in the future growth of Vietnam and that VPBank will become the top bank in Vietnam. SMBC is dedicated to providing full assistance for VPBank to accomplish this objective,” said Ohta.

With the strategic investment of SMBC, VPBank will become the second-biggest bank in Vietnam by equity. In addition, via VPBank, SMBC will be able to expand its footprint and offer funding for significant projects in Vietnam.

VPBank chairman Ngo Chi Dung said it could assist SMBC in effectively expanding its operation in Vietnam.

“This strategy may not be restricted to the financial-banking sector alone, but may also stimulate growth in many other crucial sectors of the economy, including the green economy, sustainable development, and environmentally friendly practices,” he said.

Besides Vietnam, SMFG also maintains its presence in digital finance in Indonesia and other Asian countries

Meanwhile, Kredivo Holdings (formerly FinAccel), the parent company of Kredivo and Krom Bank Indonesia, last week successfully raised $270 million in equity financing in a significantly oversubscribed round in its Series D funding phase.

This round was led by Japanese global bank Mizuho Bank, Ltd., a subsidiary of Mizuho Financial Group, Inc. and drew significant interest from Kredivo Holdings’ existing stable of top-tier investors, including Square Peg Capital, Jungle Ventures, Naver Financial Corporation, GMO Venture Partners, and Openspace Ventures.

Kredivo Vietnam is also partnering up with other firms to provide buy now, pay later products for Vietnamese customers. The firm believed that there is a great room for improvement in the segment since the bulk of the Vietnamese population lacks access to formal card payments.

Daisuke Horiuchi, group executive officer of Mizuho, said, “We are very proud to be an investor and long-term strategic partner of Kredivo Holdings. Kredivo has a stellar track record in Southeast Asia, leveraging on its deep data partnerships to promote financial inclusion within Indonesia and Southeast Asia, while maintaining bank-like risk metrics and building a capital efficient business model.”

In 2021, Mizuho also invested around $170 million to purchase 7.5 per cent ownership of Vietnamese e-wallet firm MoMo.

This is in line with Mizuho Bank’s strategic approach to ramp up its presence in the Southeast Asian country. Mizuho Bank, reported Nikkei Asia, has been lagging behind its counterparts in terms of international investment, but it intends to start actively tapping into Asian growth regions.

Hideo Suzuki, senior manager of Global Strategy Advisory at Mizuho Bank, told VIR that international investment, particularly in emerging economies like Vietnam, is one of the priorities for the bank to generate good returns.

“Thanks to a young population, a rising middle income class, stable macroeconomic condition, and fast-growing GDP, Vietnam offers lucrative opportunities for Japanese investors,” he said.

Earlier this year, MUFG Bank, a unit of Tokyo-headquartered Mitsubishi UFJ Financial Group, is signalling its ambition to ramp up its footprint in Southeast Asia. According to Dealstreetasia, MUFG has internally committed $500 million or more of equity investments to Asia, including India and Southeast Asia.

In February, it launched a $100 million fund focused on Indonesian startups through a collaboration between two subsidiaries and Indonesian commercial bank Danamon. In late 2022, it acquired the Philippines and Indonesian franchises of Home Credit, with its ownership of 100 per cent and 85 per cent respectively.

“MUFG and MUFG Bank aim to strengthen their business in Southeast Asia through the establishment of business platforms in the region together with partner banks in which the bank has invested. In executing this strategy, we will continue striving to contribute to the growth of Southeast Asia,” the company said.

Le Viet Anh Phong, financial advisory leader at Deloitte Vietnam, noted that in terms of buyers, there is a strong interest from strategic investors from Japan.

“Out of the executed transactions that Deloitte Vietnam’s professionals are exclusive advisors in the last three months, 75 per cent of strategic investors are from Japan. Positive signals also come from Singapore, Taiwan, Hong Kong, and European investors,” Phong told VIR.

“We have also observed that valuation expectations are softening, thus narrowing the valuation gap, which is undisputedly the top dealbreaker so far in Vietnam.”

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Vietnam remains an enticing business and investment environment for Japanese investors, especially in the retail sector. Furusawa Yasuyuki, general director of AEON Vietnam, explained to VIR’s Oanh Do how the company is making further efforts to develop its brand while also bringing the best value to customers.

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Representatives from around 180 Japanese businesses and investors on April 1 attended a Tokyo workshop on Vietnamese real estate, during which many of them highly appreciated the potential of Vietnam’s property market.

By Luu Huong

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