HANOI • Singapore sovereign fund GIC has hit a snag as it seeks government approval for its planned investment in Bank for Foreign Trade of Vietnam, or Vietcombank, the nation's biggest lender by market value, people with knowledge of the matter said.
The deal, originally expected to be completed by the end of last year, has yet to be approved by the Vietnamese authorities, according to the people. The government has withheld approval in part because GIC proposed to buy stock in Vietcombank at less than the market price, the people said, asking not to be identified as the information is private.
The news comes even as Vietnam Prime Minister Nguyen Xuan Phuc has said it will increase limits of foreign ownership in banks as early as this year to quicken an overhaul of its banking system and lure overseas investments to boost growth.
Shares of Vietcombank have risen 36 per cent in the past 12 months, giving it a market value of US$6.2 billion (S$8.8 billion). The lender trades at about three times book value, compared with an average 1.1 times for listed Vietnamese banks, data compiled by Bloomberg shows.
GIC said last August it reached a preliminary pact to buy 305.8 million new Vietcombank shares, equal to a 7.7 per cent holding. It agreed to buy the stock at a discount to the market price, for a total of less than US$400 million, people with knowledge of the matter said at the time.
The parties said they aimed to complete the deal by the fourth quarter last year, subject to further negotiations and regulatory approvals. The Vietnamese government has not made a final decision to block the deal, and GIC may be able to reapply for approval, the sources said, according to Bloomberg. Representatives or officials at GIC, the Vietnam government press office and the central bank's press office declined to comment.
Vietnam caps foreign ownership in banks at 30 per cent and is seeking more investment to help strengthen the financial system, which has been hobbled by a surge in non-performing loans to state- owned companies.
Mr Phuc did not specify the new ceiling to be introduced this year but indicated the government may sell out completely from the more troubled banks, singling out OceanBank as a weak institution the government is willing to part with immediately.
Allowing greater foreign ownership of banks will attract more funds to the country and help the government deal with non- performing loans, said senior economist Trinh Nguyen of Natixis in Hong Kong. "This will be a positive step forward, should it happen," she said.
The government is also pushing ahead with moves to divest state companies outside the financial sector. It is working to sell its stakes in Vietnam's two top breweries, Saigon Beer Alcohol Beverage and Hanoi Beer Alcohol Beverage.