Vietnamese banks remain attractive to foreign investors

Foreign investors’ continuous investment in Vietnam has shown their optimistic about the country’s economic outlook, despite the difficult situation of the global banking sector.

Recently, VPBank announced that it has entered into an agreement with Japan’s Sumitomo Mitsui Banking Corporation (SMBC) - a subsidiary of Sumitomo Mitsui Financial Group, Inc (SMFG) - to issue 15% of equity stake at a value of 1.5 billion USD through a private placement. The deal saw the record value in the financial sector of Vietnam so far, breaking VPBank’s own record in the 1.4-billion USD deal with FE Credit.

In the context that the banking system of the US and Europe is facing difficulties, the event has an important meaning, reflecting the attractiveness of the Vietnamese economy.

SMBC CEO Jun Ohta said that Vietnam is an important market in the development strategy of his bank, and expressed his confidence in the Vietnamese market’s growth.

Following the latest SMBC strategic investment, VPBank will become Vietnam’s second largest in terms of owner equity. Meanwhile, the deal will enable the SMBC to strengthen its presence in Vietnam and have a chance to provide capital to Vietnamese projects.

This year, M&A activities are predicted to bustle in the domestic banking sector. Along with the compulsory deals of OceanBank, CB, DongABank and GP Bank, the M&A market will be warmed up with the divestment deals of VNPost from LienVietPostBank and similar deal of Petrolimex from PGBank. Domestic commercial banks are also seeking foreign partners.

In early March, the United Overseas Bank Limited (UOB) announced the completion of its acquisition of Citigroup’s consumer banking business in Vietnam. It has also appointed senior officials to operate the expanded retail business activities in Vietnam.

Nakajima Takeo, Chief Representative of the Japan External Trade Organisation (JETRO) in Hanoi, said Vietnam is an investment destination that Japanese investors cannot ignore. Japan is now the largest investor in the banking sector of Vietnam. Three largest banks of Japan – Tokyo-Mitsubishi UFJ, Mizuho and SMSB - have become the strategic shareholders of three major banks of Vietnam – VietinBank, Vietcombank and VPBank, he noted.

With a population close to 100 million, strong digitalisation process and bright GDP outlook as well as the “go green” infrastructure development trend, Vietnam is an attractive financial market in the region and a favourable destination for foreign investors.

Data from JETRO showed that 60% of Japanese firms want to expand investment and business activities in Vietnam.

Masataka “Sam” Yoshida, Senior Managing Director & Global Head of Cross-Border Division of RECOF Corporation, held that investors are aiming to expand their long-term presence in Vietnam instead of seeking low-cost assets.