How are alliances in the banking sector performing?
Nearly half of the cooperation agreements between Vietnamese banks and foreign strategic shareholders have been terminated after one decade.
SeABank’s representative has confirmed that its foreign shareholder – Société Générale – has divested all of its shares after 10 years of investment.
An analyst noted that only half of the 10 strategic cooperation affairs between Vietnamese banks and foreign partners established 10 years ago still exist.
The trend to seek foreign strategic shareholders was triggered in 2005-2011. In 2005 alone, three deals were made, including ACB – Standard Chartered, Techcombank – HSBC and Sacombank – ANZ.
At that time, encouraged by the expansion of the financial system and the stock index rise, the banking sector became very attractive to foreign investors.
Vietnamese banks also needed ‘foreign hands’ to improve corporate governance and seek more clients.
Following three deals made in 2005, VP Bank decided to cooperate with OCBC in 2006. In 2007, Habubank welcomed a strategic shareholder Deutsche Bank, while Eximbank sold 15% of its shares to Sumitomo Mitsui.
After that, OCB, ABBank, Vietcombank, SeABank, VIB and VietinBank found suitable foreign partners.
The trend stopped after 2011 when Vietnam’s financial system fell into crisis as it was affected by the world’s 2008 financial crisis and the pouring of capital into securities and real estate – risky business fields.
In early 2012, ANZ, the strategic shareholder which was holding 10% of Sacombank’s shares, decided to divest all of its shares.
In late 2013, OCBC sold all of its 15% of shares of VP Bank after seven years of investment. The foreign bank sold shares not because of disagreement with Vietnamese partners, but because it found another which paid attractive prices.
Singapore Business Review then commented that OCBC could not resist an attractive offer to buy VP Bank shares back from a group of domestic investors. OCBC sold its shares for USD55.5 million, or 35% higher than the cost price.
However, the divestment of Techcombank shares by HSBC was another matter. In 2017, when HSBC announced the divestment, the HCMC Securities Company commented that it was not a surprise, because of the conflict in interest that would occur when they both operated in the Vietnamese market.
In early 2018, BNP Paribas sold its OCB shares, which accounted for 19% of the bank’s charter capital, while Standard Chartered left ACB.
The British bank in early 2017 announced a plan to withdraw capital from ACB in an effort to restructure its investment portfolio after it received an operation license in Vietnam.
VP Bank CEO Nguyen Duc Vinh said the biggest obstacle in the cooperation between Vietnamese banks and foreign investors is that foreign banks see the country as a short-term investment.