Analysis:Vietnam's banks tap investors for $7 billion as economy runs red hot

Vietnamese banks are preparing to raise nearly $7 billion through share sales as the rapidly growing economy fuels demand for capital, Reuters reports. This move comes amid Vietnam's push to expand economic growth with major infrastructure projects and a more open approach to foreign investment. Communist-run Vietnam, with one of Asia's fastest-growing banking industries, has previously restricted foreign ownership to 30 per cent cumulative, 20 per cent individual and strict limits on offshore borrowing.

However, recent policy changes and the government's target of 10 per cent annual economic growth through 2030 have made the country more receptive to foreign participation. Three local lenders have been granted increased foreign ownership limits of up to 49 per cent, and the ceiling on offshore borrowing has been raised by 11 per cent to $6.1 billion.

Three local banks have already begun selling shares, with total proceeds expected to reach $7 billion by the end of next year. While the capital-raising drive is aimed at bolstering banks' capital to meet stricter global Basel III requirements, it may not significantly improve their capitalisation in the long term due to rapid loan growth and rising asset prices, particularly in the real estate sector.