Vietnam’s banks tap investors for $7 bn as economy runs red hot

Vietnamese banks are set to raise nearly $7 billion through share sales as the nation's rapidly expanding economy creates a high demand for capital. This development comes as foreign investors are granted more opportunities to enter Vietnam's closely regulated banking sector. Despite restrictions on foreign ownership, capped at 30 percent for cumulative stake and 20 percent for individual shares, recent economic growth has led to a more open approach.

Communist-run Vietnam's banking industry is among Asia's fastest-growing, but the government, led by President To Lam, aims to bolster economic expansion through substantial infrastructure investments. This shift in policy has opened the door to larger foreign participation, necessary to meet growing credit demands amidst domestic funding constraints.

As a result, bank share sales are expected to generate close to $7 billion by the end of next year, according to Reuters estimates based on public disclosures and a Fitch Ratings report, which deemed this to be Vietnam's largest-ever capital-raising by lenders. In addition, the limit on offshore borrowing has been increased by 11 percent to $6.1 billion and is expected to rise further.

Three local banks have been granted higher foreign ownership limits, up to 49 percent, and Vietnam's banking sector achieved emerging market status by FTSE Russell, a major index provider, in a recent upgrade. Foreign financial institutions are also exploring equity partnerships in Vietnam, citing the country's growing consumer market and potential for financial gains as key factors in their expansion plans.