Vietnamese banks entice foreign investors

Since late December 2017, there have been cooperative deals signed between Vietnamese banks and foreign investors.

On March 12, the Vietnam Technological and Commercial Joint Stock Bank (Techcombank) unveiled that two separate legal entities managed by Warburg Pincus were to invest more than US$370 million in the bank.

In addition, several local banks such as VPBank and HD Bank announced that they had attracted hundreds of millions of dollars from international organisations. For example, VPBank were recently successful in mobilising US$250 million by selling shares in late May 2017, while HDBank also mobilised US$300 million from foreign banks last year.

Economists say foreign investment capital pouring into Vietnamese banks is likely to develop into something of a trend as the banking sector’s positive achievements will provide the foundation for major breakthroughs in 2018.

According to two major credit rating agencies, Moody's and Standard & Poor's (S&P), Vietnam’s commercial banks have witnessed a rise in ranking recently, which is enticing investors to pour capital into local banks.

Economist and finance expert Nguyen Tri Hieu says Vietnam’s banking sector has impressed Asian investors with its significant improvements recently.

Mr Hieu attributed the emergence of Asian banks into Vietnam to the similarities in culture and business methods.

Investors from the Republic of Korea, Japan, Singapore, and Malaysia say they are keen to expand their banking activities in Vietnam due to such similarities.

Hieu says that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) signed on March 8 put forth articles related to foreign banks, which can operate in one of the member nations of CPTPP without opening branches overseas.

Dr.Hieu remains optimistic about further investment by the Asian banking system in Vietnam, noting that Vietnamese banks need to improve their capacity and increase chartered capital to attract more foreign investors.

The economist points out that to enter the banking markets in the region and throughout the world, at least two out of four of Vietnam’s commercial banks are required to have a chartered capital of US$5 billion with total assets of US$50 billion.

He also calls on local banks to resolve any bad debts while the CPTPP officially takes effect in the time ahead.

“Local banks must iron out snags related to bad debts and enhance their financial capacity to ensure the good health of the banking system,” says Mr Hieu.

One of the hurdles for the banking sector is the low prestige of some local banks due to violations in management activities. The insecurity of customer’s deposits in recent times indicates that the banking sector should make radical reforms to develop a healthier system to entice further foreign investment, Hieu emphasises.