HANOI — Vietnam’s most valuable listed lender, Vietcombank, is tapping advisers for plans to raise at least $600 million in fresh equity capital to build firepower and better compete with its rivals, two sources familiar with the matter said.

The majority state-owned bank, with a market capitalisation of nearly VND450 trillion ($19 billion), has been trying for years to raise its core capital, which is the lowest among Vietnam’s state lenders.

Pressure on Vietcombank has increased in recent weeks after private lender Vietnam Prosperity Joint Stock Commercial Bank (VPBank) sold a $1.5 billion stake in March to Japan’s Sumitomo Mitsui Financial Group Inc.

Vietcombank is now doubling down its efforts for an equity private placement, partly to meet the market challenge of its local rivals including VPBank, said the two sources, who declined to be named as the discussions were confidential.

The move comes as Vietnam’s banks face heat from a slowing economy and protracted turmoil in the real estate sector, stoking an uptick in bad loans and triggering broad rate cuts.

The sources said Vietcombank has contacted advisers, including one international bank, to find potential buyers for a private placement of its shares worth at least $600 million.

One of the sources said that the bank could raise as much as $1 billion.

Vietcombank did not respond to a request for comment.

Neither of the sources named any potential buyer.

However, after Sumitomo Mitsui’s acquisition of a 15% stake in VPBank, Japanese rival banks were expected to increase their interest in new deals with Vietnamese partners, Jon Bowden, M&A partner at law firm White & Case, told Reuters.

Vietcombank’s top private investor is Japanese lender Mizuho, which holds a 15% stake in the bank, according to its website.

When asked, Mizuho said it would not comment on individual transactions. It also said Vietcombank is a strategically important partner and Mizuho aims to deepen its partnership with the bank to contribute to the Vietnamese and Japanese economies.

M&A participant?

In its push to boost its financial buffers, Vietcombank approved in January a separate plan for a technical capital raise using retained earnings.

Vietnam’s central bank (SBV) said last week it authorized Vietcombank to increase its ‘charter capital’ by a maximum of around $380 million by the middle of next year.

However, that move may still not make Vietcombank the leading bank by charter capital because its main state-owned rivals, BIDV and Vietinbank, also have plans to boost their buffers through similar technical capital raises, and VPBank would remain bigger.

Vietcombank has said it needs to boost its ‘charter capital’ and become the No. 1 state-owned bank by that measure to participate in the possible restructuring of weak banks.

Vietnam’s state news agency reported last month the central bank wanted large banks, including Vietcombank, to take over at least three smaller and weaker domestic lenders to strengthen the country’s banking system.

The Vietnamese job market saw a plunge in recruitment demand in January-April, with hiring of foreigners and overseas Vietnamese tumbling 39 percent compared to the pre-pandemic level due to the global economic downturn, according to a report recently issued by Navigos Group, one of the leading recruitment companies in Vietnam.

In addition, there was a significant drop of 63 percent in demand for hiring seasonal workers and individuals on short-term contracts. 

Similarly, the demand for recruiting new graduates also experienced a substantial decrease of 49 percent.

Following the prevailing market fluctuations and economic downturn, there was a noticeable decline in labor recruitment demand for various positions including foreigners, overseas Vietnamese, seasonal workers, short-term contracts, new graduates, and mid-level and senior professionals, according to the Navigos Group report.

Overall downtrend

Navigos Group conducted the analysis using job posting data from its platforms, VietnamWorks and Navigos Search, comparing the first four months of 2019, or the pre-COVID period, with the first four months of 2022, or post-pandemic, and January-April this year.

The findings showed that on average, the recruitment demand for various industries during the first four months of 2023 shrank 18 percent compared to the pre-pandemic period and reduced 16 percent compared to the post-pandemic recovery phase in 2022.

Notably, the textile, garment, and footwear industries experienced a persistent 39-percent fall in labor demand, primarily influenced by the global economic recession, inflation impacting purchasing power, and reduced orders.

The recruitment demand in the construction and real estate industry contracted by up to 34 percent in January-April and the procurement, materials, and logistics sectors faced a 25-percent decrease compared to 2019.

The import-export sector dwindled by 18 percent, while the transportation and logistics sector recorded a decline of 22 percent.

The tourism, restaurant, and hotel sectors, which were significantly impacted by the COVID-19 pandemic, saw the recruitment demand dive by 55 percent in the first four months of 2022 compared to the pre-pandemic level.

However, there was a slight increase in staffing requests within these sectors in January-April, with the decline reducing from 55 percent in 2022 to 43 percent when compared to the pre-pandemic level.

The legal and administrative fields also encountered a substantial decline of 31 percent in the demand for recruitment.

The recruitment demand for marketing professionals dropped by 28 percent compared to the pre-pandemic period.

Outliers

Bucking the downtrend, the banking and financial services sector, along with the consumer goods industry, experienced a growth rate of 10 percent in the first four months of 2023 compared to the equivalent period prior to the pandemic.

The recruitment demand in the healthcare, retail, and wholesale sectors remains stable, with little to no significant changes.

Navigos Group forecasts that businesses will continue to adopt cost-cutting measures to retain their workforce or may even tighten their belts further until the global economy hits its lowest point and begins to recover.

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