Exclusive-Japan's SMBC in talks to increase stake in Vietnam's VPBank, sources say

HANOI, Sept 25 : Japan's Sumitomo Mitsui Banking Corp (SMBC) is in advanced talks to increase its stake in Vietnamese private lender VPBank, four people familiar with the negotiations said.

SMBC, the banking arm of Sumitomo Mitsui Financial Group, is discussing raising its holding to approximately 20 per cent from 15 per cent, the people said, declining to be identified because the information is not public. The Japanese lender acquired the original stake in 2023 in a deal worth $1.5 billion.

The two sides intend to complete the transaction this year but remain at odds over valuation, two of the people said. One said negotiations have been underway for months. 

An expanded stake would deepen SMBC's exposure to one of Asia's fastest-growing banking markets, giving it greater access to Vietnamese consumers and businesses as the country targets rapid economic growth, rising household wealth and increased foreign investment. 

Vietnam's stock market was upgraded this week to emerging-market status by index provider FTSE Russell, a development expected to attract overseas capital and support valuations.

VPBank is seeking a substantial premium to its share price, one of the people said, in line with the 2023 transaction, when SMBC paid about 40 per cent above market value. 

SMBC has been reluctant to pay that premium and has internally discussed the possibility of increasing its holding through open-market purchases rather than a private placement, the second person said.

Both SMBC and VPBank declined to comment.

In April, VPBank said it was discussing a private placement of shares with unspecified foreign investors. 

The following month, Switzerland-based advisory firm Turicum Investment Management said in a report that VPBank is expected to raise about $700 million to $900 million from the sale of the newly issued stake.

At current market prices, a 5 per cent stake would be worth about $425 million.

When SMBC announced the 2023 deal, it said the investment would allow the bank to provide additional financial services to Japanese clients and multinational firms operating in Vietnam.

The Southeast Asian nation hosts major export-oriented manufacturing operations run by Japanese, Korean and Western firms, including Honda, Samsung and Intel.

SMBC also said at the time that the investment would help strengthen VPBank's retail banking business, including wealth management and credit cards. 

One objective of the planned increase in ownership is to give SMBC easier access to Vietnamese customers, including in the insurance and credit markets, one of the sources said.

Export-reliant Vietnam targets annual growth of at least 10 per cent through 2030, betting on infrastructure spending and rising consumption from its expanding middle class.

Japan's Mizuho Financial Group and MUFG Bank, along with South Korea's KEB Hana Bank, hold strategic minority stakes in major Vietnamese lenders.

Foreign ownership of Vietnamese banks is generally capped at 30 per cent, while an individual foreign investor, and its affiliates, is typically limited to a 20 per cent stake.

VPBank is an exception, having been allowed a higher foreign ownership ceiling of 49 per cent after it participated in the restructuring of a weaker lender, GPBank.