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Banking & Finance

OceanBank moving towards foreign stake sale

Released at: 16:08, 03/01/2018

OceanBank moving towards foreign stake sale

Photo from danviet.vn

Troubled bank wraps up initial round of negotiations over stake sale with unnamed foreign investor.

by Duy Anh

OceanBank has finished the first phase of a possible stake sale to an unknown foreign investor and is now gearing up for the next phase, its Chairman has said.

At a meeting with Deputy Governor of the State Bank of Vietnam (SBV) Nguyen Kim Anh, OceanBank Chairman Do Thanh Son said the bank has made great strides forward in cleaning up its soaring bad debts since the SBV takeover in 2015 and finished the first phase of stake sale negotiations with a foreign investor in 2017. 

Prime Minister Nguyen Xuan Phuc last year singled out OceanBank, taken over by the central bank in 2015, as a weak institution the government would be willing to sell immediately to a foreign investor.

There is a 30 per cent cap on foreign ownership of any Vietnamese bank, however, making managerial control impossible, though this can be waived by the Prime Minister on a case-by-case basis.

The SBV is known to be seeking buyers, local or foreign, for three Vietnamese banks it was forced to take over in 2015 to prevent them from going bankrupt under soaring bad debts and dubious lending practices.

The banks, each acquired for zero dong, were OceanBank, GP Bank, and the Vietnam Construction Bank, all of which still operate under SBV supervision.

Vietnam’s banking system suffered its first big crisis in 2012, when non-performing loans (NPLs) soared to some 12 per cent of all outstanding lending, according to World Bank estimates. Many of the NPLs were extended by the big four banks to State-owned enterprises (SOEs).

Although the government set up the Vietnam Asset Management Company (VAMC) as a vehicle for banks to park their worst NPLs, the bad loans must still eventually be written off. The NPL crisis, which followed the stock market crisis of 2010 and the real estate crisis of 2011, led to much better regulation of the banking system.

This has included recent crackdowns on alleged fraudulent lending practices at OceanBank, whose senior executives went on trial in August, and more recently Dong A Bank, whose executives are also in the dock.

Vietnamese authorities have dealt with bad banks in ways that have avoided knock-on effects to the broader banking system, which has remained stable and in some sectors even robust. This systemic stability can be chalked up in part to the intervention of the big four banks, which the SBV can ask to provide interbank capital to ailing banks and even managerial input.

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