The Bank for Investment and Development of Vietnam (BIDV) will offload more than 20 per cent of its equity to foreign investors this year- a pattern that has been followed by several other listed banks, this year.
About 15 per cent stake in BIDV will be sold to a strategic partner, while another 10 per cent is meant for a financial investor. “The foreign investors will provide technical assistance, help increase governance and risk management capacity, develop new products and enhance BIDV’s competitiveness,” the lender’s vice chairman Tran Phuong told Reuters.
At the same time, the Ho Chi Minh City Stock Exchange-listed bank plans to increase its charter capital by 10 per cent by issuing more shares to the existing shareholders, by June. This represents a potentially new capital of some VND31 trillion ($1.45 billion).
In 2014, BIDV reported a gross profit of over VND6 trillion ($281.7 million), up 20 per cent year-on-year. The Hanoi-based bank is determined to retain the profit growth of no less than 20 per cent in 2015.
Equitised in 2011, BIDV listed its shares on the exchange on January 24 last year. Currently, it is the sixth largest stock in terms of market capitalisation.
The state has a majority stake in the bank, 95.76 per cent, represented by the State Bank of Vietnam. In line with the equitising roadmap, until 2015, the state shareholding will be reduced to 65 per cent. Meanwhile, foreign ownership in a Vietnamese commercial bank shall not exceed 30 per cent, two thirds of which is the highest holding rate for a single foreign investor.
The bank’s stock, coded as BID, closed 0.6 per cent off on Monday to reach VND17,300 ($0.81).
Prior to BIDV, a number of listed banks have offered strategic stakes to overseas investors. Mizuho Bank has a 15 per cent in Vietcombank. The Japanese organisation paid $567.3 million for this stake in 2011. A year later, another bank from Japan, The Bank of Tokyo-Mitsubishi UFJ, purchased 19.73 per cent in Vietinbank for $743 million.
Large local banks are not alone in seeking foreign partners, Vietnamese central bank has been encouraging the foreign financial organisations to join the banking system and lend a hand in restructuring it, by purchasing “weak”, loss-making banks.
As another measure, authorities have said that banks are free to merge themselves on a voluntary basis. Therefore, rumours have it that several small lenders will soon be merged into big banks – for example, Mekong Housing Bank could merge into BIDV.
Mekong Housing Bank offered initial shares to the public in 2011 but has not listed since then. After more than 16 years of operation, its total asset reached almost VND40 trillion ($1.88 billion), the bank has a large network of 240 outlets, across the country. However, its performance has not been outstanding. According to the latest annual financial statement, its 2013 gross profit was VND142 billion ($6.67 million), relatively low compared to other lenders.