GIC buys into Vietcombank

SINGAPORE: Singapore’s GIC Pte is buying a 7.7% stake in Vietnam’s biggest lender Vietcombank for about $400 million, according to sources, in the sovereign wealth fund’s first major investment in the country’s banking sector.

“GIC will purchase nearly 306 million new shares in Vietcombank as part of the deal,’’ the fund said in a statement yesterday without disclosing the value of the transaction.

The sources, however, said the deal is priced at a nearly 25% discount to Vietcombank’s current market value of $6.9 billion.

The stake purchase by GIC, which has holdings in some of the biggest global financial institutions such as UBS AG and HSBC Holdings Plc, is a vote of confidence in the Southeast Asian nation’s banking sector, once ridden with bad debts.

Vietnamese banks have enjoyed strong credit growth backed by a rebounding economy, while bad debts in the banking system have fallen from historic highs in 2012.

GIC declined to comment beyond what it said in the statement. Vietcombank could not be immediately reached for a comment. The sources asked not to be named because the information is not public.

The deal announcement came during the visit to Singapore of Vietnamese President Tran Dai Quang, who arrived on a three-day state visit on Sunday.

In the statement, GIC said the investment “reflects its confidence in Vietnam’s longterm growth potential and that it expects the bank, whose shares have risen by more than a fifth in the past three months, can capitalise on the strong growth trajectory of the country’s banking industry.’’

Once the deal is completed, GIC would be the third-biggest investor in the lender after the State Bank of Vietnam, which currently owns a 77% stake, and Japan’s Mizuho Bank, which holds a 15% share.