Vietnam bank in line for first foreign IPO-sources
HONG KONG - The state-run Bank for Foreign Trade of Vietnam, known as Vietcombank, is planning an initial public offering that would be the country's first foreign stock listing, sources familiar with the situation said.
The IPO would give foreign investors a rare chance to invest in an economy that is growing at more than 7 percent a year, and follows Vietnam's first-ever sovereign debt issue in October.
That $750 million bond sale, arranged by Credit Suisse , attracted orders worth more than $4.5 billion and underscored the demand for access to a market where surging entrepreneurship is driving consumption growth at 20 percent a year.
Four global investment banks -- Citigroup , Credit Suisse, Goldman Sachs and UBS -- have been asked to submit IPO proposals for Vietcombank, sources said.
All four declined to comment.
Sources said the bank may seek a dual domestic and overseas listing, with Hong Kong and Singapore potentially hosting the offshore part of the deal.
The deal's timing and size were not known, although the government has allowed Vietcombank to sell up to 30 percent of its equity in phased sales due to begin this year.
Vietcombank had assets of $8.3 billion at the end of 2005, up from $7.6 billion a year earlier.
Non-performing loans at banks in Vietnam account for roughly 4 percent to 8 percent of the total.
"The risk is that the recent increase in lending could mean a rise in NPLs over the medium-term," JP Morgan credit analyst Sin Beng Ong wrote in a recent report.
In December Vietcombank sold about $88 million worth of seven-year domestic currency convertible bonds to local institutions and investors. The bank had hoped to list the convertible bonds on the Ho Chi Minh City stock exchange in February, but industry sources have said the listing would be delayed until March.
Vietnam is looking to build up its fledgling stock market, but with market capitalisation of just $1.2 billion and thin liquidity, its ability to absorb a big local IPO is limited.
On one day in January alone, the bourse's market value more than doubled because of the trading debut of dairy producer Vietnam Dairy Products Co. (Vinamilk) .
The Vietnam Index has gained 57 percent in the past year.
Early this month investment bank Merrill Lynch issued a bullish report on Vietnam, calling it a "10-year buy."
The country's banking sector has been among the most active for corporate activity.
Since early 2005, HSBC Holdings , Standard Chartered Plc. and Australia and New Zealand Banking Group Ltd. have bought 10 percent stakes in Vietnamese lenders.
Singapore's Oversea-Chinese Banking Corp. is expected by year-end to buy a 10 percent stake in part-private, unlisted Vietnam Joint Stock Commercial Bank for Private Enterprise, or VP Bank, which has a market value of $90 million.
Vietnam limits foreign ownership in its banks to 30 percent.
JP Morgan said in its report, however, that the industry's capital needs will probably lead to an increase in that cap.
VP Bank, the Bank for Investment and Development of Vietnam (BIDV) and Vietcombank have all been expected to list domestically.
By Tony Munroe & Ho Binh Minh - Reuters - February 23, 2006.
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