20% bank ownership hasn’t much significance to foreign investors

20% bank ownership hasn’t much significance to foreign investors

The ceiling proportion of stakes a foreign investor can hold in a bank has been lifted from 15 percent to 20 percent. However, the 5 percent increase proves to be not attractive enough to foreign institutions.

Tay Han Chong, CEO of Mekong Development Bank (MDB) once commented that 20 percent was not enough for a foreign investor to hold the control in a bank. Meanwhile, the right of control is what the majority of foreign investors strive to.

“The foreign partners would ask themselves why do they need to make every effort to develop a bank of which they only hold 20 percent of stakes,” he said.

Tay represents Fullerton Financial Holding, a 100 percent owned subsidiary of Singaporean Temasek Holdings Pte, which holds 20 percent of MDB’s shares.

He said the ideal ownership ratio for one foreign investor in a Vietnamese bank is 50 percent at least.

Nguyen Xuan Binh, a senior executive of Bao Viet Securities Company, believes that the latest decision by the government to lift the foreign ownership ratio of one foreign investor in a Vietnamese bank from 15 percent to 20 percent would not have big impacts on the merger and acquisition (M&A) market.

Binh said that a foreign strategic investor generally wish to hold 30 percent or more stakes in an institution to be able to have the right to program the bank development.

Also according to Binh, the allowed ownership ratios are above 30 percent.

The decision on lifting the total foreign ownership ratio to above 30 percent in some special cases and the foreign ownership ratio of one investor from 15 percent to 20 percent, in fact, has not been expected on recent days.

Binh commented that what securities investors are expecting now is the decision to allow increasing the foreign ownership ratio in public companies from the current 49 percent.

Therefore, Binh said the new regulation about the bank ownership ratio does not have influences to the stock market in the short term.

The bank share prices have been staying unchanged. Some bank shares saw the prices increase on January 7, but the increases were very slight.

The noteworthy thing is that while the proportion of stakes one investor can hold has been lifted, the total foreign ownership ratio in a bank remains unchanged, at 30 percent, except some special cases, where the deals get the Prime Minister’s approval.

In the past, one foreign investor could hold 15 percent of stakes of a bank at maximum. However, the proportion could be up to 20 percent if the stake purchase got the nod from the Prime Minister.

MDB, for example, sold 20 percent of stakes to Singaporean Temasek. The other cases include HSBC in Techcombank, Bank of Tokyo-Mitsubishi UFJ in Vietinbank, and Maybank in Vietcombank.

With the new regulation, one investor would be able to acquire 20 percent of stakes of a bank without having to ask for the permission from the Prime Minister. This is believed to bring the opportunities to many foreign investors, including Japanese Sumitomo Mitsui Financial which holds 15 percent of Eximbank shares, or Mizuho Financial which holds 15 percent of Vietcombank stakes.

vietnamnet