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

Japan's Sumitomo Mitsui Banking Corp (SMBC) is engaged in advanced negotiations to increase its ownership stake in Vietnam's private lender VPBank, according to sources. The Japanese lender, which acquired its original stake in 2023 for $1.5 billion, is seeking to raise its share from 15% to around 20%, sources said, without disclosing their identities due to the information not being public.

The Japanese bank and VPBank are at odds over valuation, with negotiations said to have been ongoing for months. SMBC's intent is to deepen its engagement with Vietnam's thriving banking sector, providing increased access to Vietnamese consumers and businesses as the Southeast Asian nation strives for rapid economic growth and infrastructure development.

Vietnam recently received an emerging-market designation from FTSE Russell, which is expected to draw overseas capital and bolster valuations. The Vietnamese lender VPBank is requesting a significant premium for its shares, similar to the 2023 deal when SMBC paid approximately 40% above market value. SMBC has been hesitant to pay this premium and has explored the possibility of increasing its holding via open-market purchases instead of a private placement.

In April, VPBank discussed a private placement of shares with unspecified foreign investors, and later that month, Turicum Investment Management estimated the sale of the newly issued stake could raise $700 million to $900 million. A 5% stake in VPBank would be worth around $425 million at current market prices. SMBC's 2023 investment aimed to offer additional financial services to Japanese clients and companies operating in Vietnam, as well as bolster VPBank's retail banking business, including wealth management and credit cards.

The foreign ownership of Vietnamese banks is typically capped at 30%, with individual foreign investors and their affiliates limited to a 20% stake, except for VPBank, which was granted a higher limit of 49% following its involvement in the restructuring of a weaker lender, GPBank.