Shares turn cheap, Japanese quietly try to acquire Vietnamese banks

Europeans keep away, Japanese flock into Vietnam

While the newly-elected President of Sacombank Pham Huu Phu announced that the bank may sell 15 percent of its stakes to a Japanese banker, a lot of investors kept dubious about the news, thinking that the statement just aimed to catch the attention from the public.

However, they later realized that the president told the truth, and that Japanese investors have got ready for a “big game” in Vietnam. Sources all have confirmed that Tokyo – Mitsubishi UFJ, belonging to MUFJ, is wrapping up the plan to buy stakes of Vietinbank, one of the biggest banks in Vietnam.

Nikkei has reported that Tokyo – Mitsubishi UFJ plans to wrap up the deal of acquiring 20 percent of Vietinbank’s stakes, worth US$726 million, in the first half of 2013. Mitsubishi UFJ, now the biggest lender in Japan, is believed to pay VND22,800 per share, which is a bit higher than the current market price at VND20,000.

In case of Sacombank, Phu said that the bank may sell 15 percent of its stakes to a Japanese partner in the next four months, or early 2013.

In 2011, Mizuho Financial Group spent US$567.3 million to buy 15 percent of the additionally issued shares, or 347.6 million shares, of Vietcombank, also a big bank in Vietnam. The deal has made Mizuho become the only strategic partner of Vietcombank.

In 2007, Sumitomo Mitsui Financial Group bought 15 percent of shares of Eximbank at $225 million.

As such, nearly all the biggest Vietnamese banks have got the strategic investors from Japan.

Meanwhile, the investors from Europe and US seem to be indifferent to the opportunities of becoming strategic shareholders of Vietnamese banks.

Before Tokyo – Mitsubishi UFJ turned up, Vietinbank nearly reached an agreement with Nova Scotia Bank on the sales of Vietinbank’s stakes to the Canadian bank. However, later, Nova Scotia demanded a lot of other things which it did not mention during the negotiations. Of course, Vietinbank refused to satisfy the enigmatic requirements set by Nova Scotia, and the deal failed.

Before making IPO (initial public offering), Vietcombank once reached an agreement with a US bank on selling Vietcombank’s shares. However, due to some problems, the affair was never completed.

Why Vietnam?

It is a growing tendency that Japanese investors now eye South East Asian countries, including Vietnam, Thailand, Indonesia, planning to make investment there in order to avoid the heavy reliance on China. The increase in the investment of Japanese enterprises would automatically attract more Japanese banks to Vietnam which act as the capital providers.

By acquiring shares of a Vietnamese bank, Tokyo – Mitsubishi UFJ will be easily provide services to the Japanese enterprises in Vietnam.

Since the Japanese economy has entered the stagnant period, Japanese banks now have $2 trillion worth of capital in excess. The presence in Vietnam would help them obtain more big clients such as Yamaha Motor or Canon which are making investment in Vietnam.

According to Thomson Reuters, Japanese enterprises spent $83.8 billion on the merger and acquisition deals in 2012. In Vietnam, Japanese investors are the biggest parties in the deals made in 2012.

Vietnam’s banking system is facing some problems, including the high bad debt ratio. However, the government of Vietnam has committed to reduce the bad debt ratio to 3-4 percent in accordance with the international standards by the end of 2015.