VPBank’s stake sale to SMBC to uplift its capital, balance growth plan

But “aggressive” growth plan, real estate sector woes will weigh on asset quality.

The planned stake sale of Vietnam Prosperity Joint Stock Commercial Bank (VPBank) to Sumitomo Mitsui Banking Corporation (SMBC) will positively impact the Vietnamese bank’s capital, according to a commentary released by Moody’s Investors Service.

VPBank announced on 27 March that it has entered into an agreement with SMBC to sell 15% of its equity stake for VND35.9t. The stake sale is pending approval from the State Bank of Vietnam and State Securities Commission. It is expected to be completed between Q2 and Q3 of 2023.

Following the sale, VPBank’s capital will increase to 18.7% from 13.6%, the highest amongst Moody’s rated banks in Vietnam. 

The stake sale is also expected to balance by its aggressive growth plan in 2023. VPBank has announced plans to grow its total assets by 39% by 2023, and pay cash dividends amounting to 47% of its 2022 profit after tax in 2023. All these will weigh on capital, narrowing its improvement.

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Furthermore, the stress faced by Vietnam's real estate sector and in the bank's consumer finance subsidiary will worsen VPBank’s asset quality.

VPBank’s non-performing loan (NPL) ratio rose by 5.7% in end-2022 from 4.6% in 2021. This was due to slippages from loans restructured due to the pandemic, as well as consumer finance loans. 

The bank’s asset quality will further weaken over the next 12-18 months due to its high exposure to the real estate sector in Vietnam.