What’s going on here?

Vietnam’s government is looking to sell part of its stake in Military Commercial Joint Stock Bank (MBB ∧ 0.47%) – a large local lender with a market capitalization of $2 billion.

Who is Military Commercial Bank

• The Military Commercial Bank is owned of
  • 44% by the government;
  • 11% by Domestic and foreign financial institutions;
  • the rest by individual investors and entities such as mutual funds.
• In addition to regular commercial banking services, the Hanoi-headquartered Military Commercial Bank also
  • has an asset-management company and
  • operates insurance services under MB Ageas Life Insurance Co. Ltd.

It owns more than 100 branches, including two in Laos and Cambodia, and a representative office in Russia.

• Its net profit nearly doubled to $267 million last year, and its total assets ended 2018 close to $16 billion.

What does that mean?

• The stake sale would likely attract interest from other Asian banks, possibly from Japan and South Korea, among others, and help Military Commercial Bank meet new international capital requirements.
• About the past:
  • In 2012, Bank of Tokyo-Mitsubishi UFJ paid $743 million for a 20% stake in the state-owned VietinBank (Vietnam Joint Stock Commercial Bank for Industry and Trade);
  • In 2016, Singapore sovereign-wealth fund GIC Pte. Ltd. acquired a 7.7% stake in Vietcombank, the country’s largest bank by market capitalization;
  • In 2018, Techcombank (one of the country’s largest private sector banks), raised $922 million in an IPO.

The big picture

• The government is appointing banks to conduct the sale, likely to a single strategic partner. Hanoi is paring its ownership of hundreds of state enterprises to move toward a more private-sector-led economy.
• The government has been working to
  • open up a fragmented banking sector to competition and
  • inject foreign technology and expertise into its financial system.

Foreign interest in this frontier market has been high, in line with its strong economic growth—7.1% in 2018.

• Vietnam is among the biggest beneficiaries of redirected trade flows as multinational companies work around a trade dispute between the U.S. and China. The country’s benchmark Ho Chi Minh stock index is up 9.7% so far this year.

Content source: Venkat. P.R., Watts. J.M. (2019) Vietnam Seeks to Sell Stake in Military Commercial Bank. The Wall Street Journal. Available from: https://www.wsj.com/articles/vietnam-seeks-to-sell-stake-in-military-commercial-bank-11563160055?mod=hp_lista_pos1# [Accessed 16 July 2019]