Lenders tinker with FOL caps to enhance prospects

March 18, 2022 | 18:19
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A number of local institutions are attempting to broaden their worldwide reach by creating further room for international financiers.
Lenders tinker with FOL caps to enhance prospects
Some banks are adjusting ownership limits in order to boost overseas engagement, photo Le Toan

After increasing its ownership percentage in Sacombank to more than 5 per cent last week, Dragon Capital has emerged as the bank’s most substantial stakeholder.

Dragon Capital purchased an additional 1.25 million shares of Sacombank via affiliate Vietnam Enterprise Investments Ltd., raising the total number of the bank’s stocks from 93.9 million to more than 95.2 million.

In terms of Sacombank holdings among Dragon Capital’s member funds, Norges Bank boasts the largest ratio with roughly 18 million shares. Amersham Industries Ltd. and Vietnam Enterprise Investments come in second and third, respectively.

Dragon Capital has also become a key shareholder of military-run lender MB after four member funds purchased a total of 916,800 shares of the Hanoi-headquartered bank.

MB takes up a significant portion of Dragon Capital’s portfolio in terms of market capitalisation. Previously, the fund voiced confidence in MB’s outlook.

Le Anh Tuan, Investment Strategy director at Dragon Capital, said, “This year has all the ingredients for upbeat banking stocks prospects. Credit demand is bound to be enhanced, bad debt is expected to decline significantly, and the industry’s average profit is anticipated to grow 30 per cent from the previous level.”

Additionally, Tuan added, there is a plethora of supporting evidence, such as several banks executing the sale of strategic capital, the rapid profit recorded from exclusive bancassurance, and approval to enhance foreign investor capacity.

Meanwhile, SHB has also adjusted its foreign ownership limit (FOL) from 10 to 30 per cent, reaching its maximum international cap. Market watchdogs believed this effort is expected to boost foreign engagement since SHB currently lacks a strategic partner.

Last year, SHB struck a $156 million deal to sell consumer finance arm SHB Finance to Ayudhya Bank (Krungsri) of Thailand – a part of Mitsubishi UFJ Financial Group.

SHB has transferred 50 per cent of SHB Finance’s charter capital to Krungsri. The remaining 50 per cent ownership would be given to the Thai lender after three years.

Last week, VPBank also raised its FOL from 15 to 17.5 per cent, setting the path for the arrival of a foreign strategic partner – rumoured to be Sumitomo Mitsui Banking Corporation (SMBC) – in the coming months.

The charter capital of a bank cannot be more than 30 per cent owned by foreign investors, as per existing legislation, and no foreign entity may control more than 15 per cent of that stock.

When SMCB deliberately offloaded its stakes in Eximbank in February, this allegation was further reinforced. Following the acquisition of 49 per cent of FE Credit’s stock by SMBC last year, the bank is envisaged as becoming the largest strategic stakeholder, owning 15 per cent of VPBank’s ownership.

VIB, in the same vein, has capped its FOL ratio at 20.5 per cent, while OCB is also proactively seeking another foreign suitor after its landmark deal with Japan’s Aozora Bank in 2020.

MB, meanwhile, is currently speculated to be a prospective suitor of “zero-VND” Ocean Bank, one of three Vietnamese troubled lenders that, together with GPBank and CBank, are subject to special supervision of the State Bank of Vietnam.

Luu Trung Thai, vice chairman and CEO of MB, emphasised that the collaboration with OceanBank represents both great political and business promise. Following the government-approved roadmap, MB will engage with OceanBank to examine the data system and provide a proposal for consideration by the government.

OceanBank’s financial statements, on the other hand, are segregated and not consolidated with those of MB, as required by rules. In the long run, the advantages of this agreement could outweigh the downsides that MB will have to bear, SSI Research assessed.

“In summary, OceanBank may be a lucrative acquisition for MB and contribute to the bank’s long-term growth provided management sail the ship on the proper path. In such a situation, the agreement also favours the domestic economy in the long run,” the analytical team concluded.

Earlier this year, Vietcombank emphasised that a concrete plan should be in place for removing the bank’s FOL constraint, which is projected to lift to 35 per cent in the near future. Vietcombank’s biggest foreign stakeholder is Mizuho Bank of Japan, followed by Singapore’s sovereign wealth fund, GIC Pte., Ltd.

Do Hong Van, data analytics head of Financial Information Services for data provider FiinGroup, stated that banks’ profit growth is likely to outpace that of non-financial enterprises, which is in stark contrast to 2021 when the profit growth of the banking sector was substantially lower than the overall expansion of the market.

Fifteen of the 27 banks that are publicly traded on the stock market possess foreign ownership of more than 15 per cent. Of those, banks on the verge of reaching their foreign limit ratio include ACB, ABBank, VietinBank, MB, MSB, OCB, Techcombank, TPBank, and Vietcombank.

By Tri Lam

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