SCB permitted to sell over 50% of shares to foreign investors

Speaking at the bank’s general meeting in HCM City, CEO Vo Tan Hoang Van confirmed the central bank’s approval for the share sale and said the bank is in talks with foreign partners.

“SCB is in negotiations with foreign partners to sell more than 50% of its shares after it got approval in principle (from the State Bank of Vietnam). SCB is looking for a financial group that can help the bank improve its finances, accelerate its restructuring, settle its bad debt, and draw up a development plan,” Van said.

He however noted some partners had approached the bank for negotiations but it is far from simple to find a partner who has a long-term commitment and a strong financial position, and meets the prevailing rules on share acquisitions by strategic foreign investors.

Most of the partners that have expressed interest in the bank are financial investment funds with little or no intention of doing long-term business with the bank, which he said is not good for a bank undergoing restructuring like SCB.

In addition, the strict legal requirements for foreign investors to buy into local banks hinder the bank’s search for a strategic foreign investor. He said banks, finance companies and finance leasing firms must have total assets of at least US$10 billion in the year before filing for bank share acquisition, according to Government Decree 01/2014/ND-CP.

The requirement for other foreign institutional investors is they must have minimum chartered capital of US$1 billion.

Moreover, foreign banks, finance companies and financial leasing firms must have legal banking operations in the countries where they are headquartered if they want to own more than 10% of a Vietnamese bank’s chartered capital. SCB said this is another impediment for the bank to get a foreign investor on board.

SCB has found a couple of partners but they are not financial institutions, Van said, so SCB is feeling helpless.

He proposed the central bank relax the rules by considering allowing foreign investors to buy into local banks on a case-by-case basis. But a central bank official underscored the need to strictly screen strategic foreign investors in local banks that are being restructured as a risk-averse measure since banking business is conditional.

The central bank encourages local banking institutions, especially ailing ones, to find foreign investors to speed up their restructuring and improve their finances. A number of banks such as DongA Bank and OceanBank are being explored by foreign investors.

At the SCB shareholder meeting on April 18, many shareholders asked the board chairman about dividend payment. The bank is in the process of restructuring, so dividend payment is impossible even though SCB has been profitable in recent years, said SCB chairman Dinh Van Thanh.

Thanh said the top priority now is to use all resources for restructuring, provisioning and securing sustainable development.

In the short term, shareholders, especially for small ones, may be displeased but this strategy would bring big benefits in the long term, he noted.