Local banks struggling to find foreign partners
Local banks struggling to find foreign partners
It appears that many foreign players are mulling alternatives to joining with local partners to bolster efficiency when it comes to mergers and acquisitions in the banking sector.
The most recent development was a rumour that HSBC is looking to divest from its 20 per cent stake in Techcombank when the technical agreement between the two sides expires this June. Insiders say that it is unlikely this agreement will be extended.
Notably, HSBC did not join Techcombank’s board members in the new tenure, 2014-2019.
Similarly, local Mekong Development Bank (MDB) revealed that its strategic partner, Singapore’s Fullerton Financial Holdings, which holds 20 per cent of the bank, will sell its entire stake to also local Maritime Bank, after it merges with MDB.
In late 2013, Japan’s OCBC sold its 15 per cent position in local VPBank.
The IMF and ANZ have also already divested from local Sacombank.
Scores of local banks have not only found it difficult to hold onto, but also find new foreign strategic partners as well.
Sacombank, two years since bidding farewell to its international partners, has yet to find a replacement.
Similarly, Ho Chi Minh City-based HD Bank, after failing to source partners last year, has pushed its plan to this year.
VPBank, after parting with OCBC, planned to find a new partner, but has made little progress.
According to Nguyen Manh Hung, an expert from the central bank’s Banking Strategy Institute, said there is a high demand for foreign investors from Vietnamese banks.
The current cap on foreign holdings in a Vietnamese bank is set at 30 per cent, but the average stake as of last year was lower than 10 per cent.
Explaining why local banks have found it so hard to find strategic partners, senior financial expert Nguyen Chi Hieu said foreign banks were also hard hit by the global financial downturn and were also cautious about investing in Vietnamese banks during the sector’s previous boom phase and now resultant restructuring period.
However many other experts are of the view that foreign investors were mulling other options such as setting up independent operations rather than teaming up with local institutions.
After divesting from Sacombank, ANZ scaled up its presence as a wholly foreign-owned bank in Vietnam by focusing on retail banking and services for local businesses.
HSBC, though yet to reveal whether it will divest from Techcombank, has more than doubled its chartered capital, from VND3 trillion ($142 million) to more than VND7.5 trillion ($357 million) to leverage its plan to expand throughout the country.
Foreign banks are being increasingly cautious in their investment decisions. Deputy director of the Central Institute for Economic Management Vo Tri Thanh said transparency was a key factor in attracting foreign investors.
He said transparency must exist at all levels and banks must commit to it both in their reporting and operations.
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