Hunt for Vietnam banks has begun

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Stressed Vietnamese banks are facing rising interest of foreign buyers in its shares, whose value in the past was continuously shrinking on the back of amassed toxic debt and due to chaotic liberalisation.

Japan’s biggest bank Mitsubishi UFJ on December 26 bought a 20 per cent stake worth $743 million in state-owned VietinBank, the largest-ever merger or acquisition deal in Vietnam’s banking sector so far.

However, VietinBank, or Vietnam Joint Stock Commercial Bank for Industry and Trade, said the State Bank of Vietnam will continue to own the majority of its shares.

In September 2011, Mizuho Financial Group spent $567.3 million to buy 15 per cent of additionally issued shares of Vietcombank, also a big bank in Vietnam. The deal has made Mizuho become the only strategic partner of Vietcombank.

Sumitomo Mitsui Financial Group is a 15 per cent shareholder of Eximbank since 2007.

As such, nearly all the big Vietnamese banks have got strategic investors from Japan while European and US banks are waiting on the sidelines, it seems.

This reluctance has certainly to do with the weakness of Vietnam’s banking system, which is obviously seen as a buying opportunity by the Japanese but treated with caution by the EU and the US which have already made their experience with toxic debts.

After a decade of rapid and chaotic bank liberalisation, Vietnam now has 42 domestic banks. Many are overloaded with bad debts. In September, Moody’s downgraded Vietnam’s credit rating from “B1” to “B2”, citing weaknesses in the banking system that may hit medium-term growth, and “an elevated risk” of a costly government banking bailout.

Economists stress the need to woo more foreign players into the nation’s crisis-hit banking sector to inject new cash and bring greater expertise to avoid a bailout. The government of Vietnam has committed itself to reduce the bad debt ratio to 3-4 per cent from currently close to 9 per cent in accordance with international standards by the end of 2015.

Total loans in Vietnam’s banking system are estimated at $140 billion, the government has said. This brings the amount of toxic debt to $12.6 billion.

 

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Reading Time: 2 minutes

Stressed Vietnamese banks are facing rising interest of foreign buyers in its shares, whose value in the past was continuously shrinking on the back of amassed toxic debt and due to chaotic liberalisation.

Reading Time: 2 minutes

Stressed Vietnamese banks are facing rising interest of foreign buyers in its shares, whose value in the past was continuously shrinking on the back of amassed toxic debt and due to chaotic liberalisation.

Japan’s biggest bank Mitsubishi UFJ on December 26 bought a 20 per cent stake worth $743 million in state-owned VietinBank, the largest-ever merger or acquisition deal in Vietnam’s banking sector so far.

However, VietinBank, or Vietnam Joint Stock Commercial Bank for Industry and Trade, said the State Bank of Vietnam will continue to own the majority of its shares.

In September 2011, Mizuho Financial Group spent $567.3 million to buy 15 per cent of additionally issued shares of Vietcombank, also a big bank in Vietnam. The deal has made Mizuho become the only strategic partner of Vietcombank.

Sumitomo Mitsui Financial Group is a 15 per cent shareholder of Eximbank since 2007.

As such, nearly all the big Vietnamese banks have got strategic investors from Japan while European and US banks are waiting on the sidelines, it seems.

This reluctance has certainly to do with the weakness of Vietnam’s banking system, which is obviously seen as a buying opportunity by the Japanese but treated with caution by the EU and the US which have already made their experience with toxic debts.

After a decade of rapid and chaotic bank liberalisation, Vietnam now has 42 domestic banks. Many are overloaded with bad debts. In September, Moody’s downgraded Vietnam’s credit rating from “B1” to “B2”, citing weaknesses in the banking system that may hit medium-term growth, and “an elevated risk” of a costly government banking bailout.

Economists stress the need to woo more foreign players into the nation’s crisis-hit banking sector to inject new cash and bring greater expertise to avoid a bailout. The government of Vietnam has committed itself to reduce the bad debt ratio to 3-4 per cent from currently close to 9 per cent in accordance with international standards by the end of 2015.

Total loans in Vietnam’s banking system are estimated at $140 billion, the government has said. This brings the amount of toxic debt to $12.6 billion.

 

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