HDBank’s IPO Could Prompt More Vietnamese Banks to Follow Suit: Moody’s

Tuan Minh

12:25 04/12/2017

BizLIVE - At $300 million, HDBank’s planned IPO is second in size to Bank for Foreign Trade of Vietnam.

HDBank’s IPO Could Prompt More Vietnamese Banks to Follow Suit: Moody’s

A transactions office of HDBank. Photo: VGP

Vietnam-based Ho Chi Minh City Development JSC Bank (HDBank)’s upcoming initial public offering (IPO), if successful, would be credit positive for the bank and prompt more banks to follow suit, Moody’s Investors Service has said in a note sent to BizLIVE.  
HDBank (B2 stable, b3) has disclosed that it plans to sell up to a 20% stake to foreign investors for $300 million at an imminent IPO to foreign investors and plans to list its shares on the Hochiminh Stock Exchange (HOSE) in early 2018.
“If successful, the IPO would be credit positive for HDBank because it will strengthen its capitalization and loss-absorbing buffers amid rapid credit growth,” Moody’s analysts Rebaca Tan and Eugene Tarzimanov, vice President and senior credit officer, said in the note.
At $300 million, HDBank’s planned IPO is second in size to Bank for Foreign Trade of Vietnam, known as Vietcombank’s, (B2 stable, b1) $463 million IPO in 2007. Vietnam Prosperity Joint Stock Commercial Bank, or VPBank (B2 stable, b3), raised $250 million in an IPO in May 2017.
As part of the IPO, we understand that HDBank priced its shares at above 3x its book value, which is a higher valuation than the price-to-book ratios of listed Vietnamese banks, says Moody’s.
HDBank’s share sale will involve a mix of new and old shares, generating $150 million of new equity for the bank. Following the transaction, HDBank expects new shareholders to own 21.5% of the bank.
Based on HDBank’s capital position as of December 31, 2016, the credit rating agency estimates that the capital raise will increase its Tier-1 ratio by nearly four percentage points to 14.8%, thereby becoming one of the best capitalized banks among the Moody’s-rated Vietnamese banks.
Source: The banks and Moody’s Investors Service 
“The additional capital will support the bank’s solvency amid continued balance sheet expansion,” Moody’s said.
Similar to other Vietnamese banks, rapid loan growth and dividend payments to shareholders are exerting pressure on HDBank’s capital buffer. The bank’s large dividend payout in 2016 against strong loan growth of 45%, well beyond the industry average of 26%, led to an approximately one-percentage-point drop in its Tier-1 ratio to 10.8% at the end of 2016 from 11.8% a year earlier.
After merging Dai A Bank JS Commercial Bank (DaiABank) into it in 2013, HDBank has now a registered capital of 8.1 trillion dong ($356.8 million). Billionaire Nguyen Thi Phuong Thao, CEO of low-cost carrier VietJet Air, is vice chairperson of HDBank. Meanwhile, the bank is chaired by Le Thi Bang Tam, chairwoman of Vinamilk (VNM), the largest company in Vietnam by market value.

TUAN MINH

Emagazine