Under the EVFTA Agreement, European banks will be able to increase their stake in two Vietnamese banks to a maximum of 49% without having to wait for a decision to open a common room. IVS thinks there are 4 potential banks that could take advantage of this opportunity.
Specifically, within 5 years from the date of entry into force of the EVFTA Agreement, Vietnam commits to giving favorable consideration to allowing EU credit institutions to raise foreign ownership to 49% of the charter capital in 2 joint-stock commercial banks of Vietnam (This does not apply to 4 joint-stock commercial banks where the State holds dominant shares are BIDV, Vietinbank, Vietcombank, and Agribank).
IVS said that, in terms of investment, Vietnamese banks have a great attraction to international organizations.
According to an expert from JPMorgan: "Vietnamese banks are an outstanding investment opportunity in Southeast Asia". However, foreign investors are facing major legal barriers related to the ceiling of a 30% ownership limit of foreign investors in Vietnamese banks. With this commitment from EVFTA, European banks that are currently having strong IB activities in the Vietnam market in particular (Deutsch Bank, Norges Bank) and Southeast Asia, in general, will be most interested.
When the room is widened, the target banks will have access to large capital, supporting credit operations expansion, especially in the context that banks are limited to the LDR ratio of 85% according to Circular 22/2019.
Besides, this is also a great opportunity to access the effective management system of the capital banks as well as the opportunity for the target banks to reach the international market. In fact, European banks have strengths in scale and experience, as well as high governance standards (both are applying Basel III and proceeding to Basel IV).
Therefore, the selection of partners must be based on the criteria to ensure investment returns (good profit margins), effective risk control, organization image improvement (growth opportunities and strengths in the mining segment), especially meeting international standards in operational management (Basel II and Basel II, IFRS reports).
According to an analysis of IVS, VPBank, VIB, MBBank, Techcombank are currently the banks with the highest NIM. ACB, MBBank, Techcombank are the 3 banks with the lowest bad debt ratio. In terms of governance, VIB and VPBank are the first two banks to complete the implementation of all three pillars of Basel II.
Meanwhile, according to Moody's credit rating published in December 2019, Techcombank, MBBank, VPBank, VIB, and ACB are the joint-stock commercial banks (other than SOCBs) with the highest ratings (including BCA, partner risks, issuers, and debt mobilizers) in 31 Vietnamese banks ranked.
Based on these analyses, IVS considers VIB, VPBank, Techcombank, and ACB to be the most potential candidates that could be considered for opening a foreign room at the proposal of a European bank. The chance of a break out is huge, however, this will only be a long-term story.
>> Many opportunities in Vietnamese banks for European investors