Top Vietnam bank weighs share issue to raise at least $600M: sources

The majority state-owned bank, with a market capitalization of nearly VND450 trillion ($19 billion), has been trying for years to raise its core capital, which is the lowest among Vietnam’s state lenders.

Pressure on Vietcombank has increased in recent weeks after private lender Vietnam Prosperity Joint Stock Commercial Bank (VPBank) sold a $1.5 billion stake in March to Japan’s Sumitomo Mitsui Financial Group Inc8316.T.

Vietcombank is now doubling down its efforts for an equity private placement, partly to meet the market challenge of its local rivals including VPBank, said the two sources, who declined to be named as the discussions were confidential.

The move comes as Vietnam’s banks face heat from a slowing economy and protracted turmoil in the real estate sector, stoking an uptick in bad loans and triggering broad rate cuts.

The sources said Vietcombank has contacted advisers, including one international bank, to find potential buyers for a private placement of its shares worth at least $600 million.

One of the sources said that the bank could raise as much as $1 billion.

Vietcombank did not respond to a request for comment.

Neither of the sources named any potential buyer.

However, after Sumitomo Mitsui’s acquisition of a 15% stake in VPBank, Japanese rival banks were expected to increase their interest in new deals with Vietnamese partners, Jon Bowden, M&A partner at law firm White & Case, told Reuters.

Vietcombank’s top private investor is Japanese lender Mizuho8411.T, which holds a 15% stake in the bank, according to its website.

When asked, Mizuho said it would not comment on individual transactions. It also said Vietcombank is a strategically important partner and Mizuho aims to deepen its partnership with the bank to contribute to the Vietnamese and Japanese economies.

M&A Participant?

In its push to boost its financial buffers, Vietcombank approved in January a separate plan for a technical capital raise using retained earnings.

Vietnam’s central bank (SBV) said last week it authorized Vietcombank to increase its ‘charter capital’ by a maximum of around $380 million by the middle of next year.

However, that move may still not make Vietcombank the leading bank by charter capital because its main state-owned rivals, BIDVBID.HMand VietinbankCTG.HM, also have plans to boost their buffers through similar technical capital raises, and VPBank would remain bigger.

Vietcombank has said it needs to boost its ‘charter capital’ and become the No. 1 state-owned bank by that measure to participate in the possible restructuring of weak banks.

Vietnam’s state news agency reported last month the central bank wanted large banks, including Vietcombank, to take over at least three smaller and weaker domestic lenders to strengthen the country’s banking system.