Mitsubishi UFJ Financial Group Inc. may become Japan's third megabank in five years to buy a stake in a Vietnamese lender, part of a surge in the country's investment to Southeast Asia as the region develops.
Mitsubishi UFJ's lending unit is seeking to buy 20 percent of VietinBank from the Vietnamese government, said two officials from Japan's biggest bank, who asked not to be named as the matter is private. The price may reach 60 billion yen ($720 million), the Nikkei newspaper reported earlier.
A shrinking population, contracting economy and entrenched deflation at home have left Japan's banks with $2 trillion of unlent deposits. An increased presence in Vietnam could help the Tokyo-based megabanks service Japanese manufacturers from Yamaha Motor Co. to Canon Inc. that are investing in the nation.
"Every Japanese corporation sees its survival in expanding overseas," said Fiachra MacCana, managing director of Ho Chi Minh City Securities Corp. For Japanese lenders, even as Vietnamese banks struggle to contain bad debts, low banking penetration makes the nation "very compelling in the long term."
The price and time frame for an agreement haven't been decided, according to the Mitsubishi UFJ officials.
A $720 million purchase would be the biggest foreign investment in a Vietnamese bank, eclipsing the $560 million Mizuho Financial Group Inc. spent this year buying 15 percent of state-owned Joint-Stock Commercial Bank for Foreign Trade of Vietnam, known as Vietcombank. Sumitomo Mitsui Financial Group Inc. bought 15 percent of Eximbank, or Vietnam Export-Import Commercial Joint Stock Bank, for $225 million in 2007.
VietinBank, whose full name is Vietnam Joint Stock Commercial Bank for Industry and Trade, is the nation's second-biggest publicly traded bank, with a market value of VND52 trillion ($2.5 billion). Mitsubishi UFJ wants to make the investment in the first half of next year, the Nikkei reported.
Shares of VietinBank rose 2 percent to VND20,300 at 2:01 p.m. in Ho Chi Minh City trading. Mitsubishi UFJ climbed 1.1 percent to 382 yen at the close of trading in Tokyo.
Yuji Okumura, a Tokyo-based spokesman for Mitsubishi UFJ, declined to comment, as did Pham Huy Hung, chairman of Hanoi- based VietinBank.
The Vietnamese lender had wanted to sell a 15 percent stake to Bank of Nova Scotia earlier this year, Chairman Hung said in September. Discussions with the Canadian bank broke down over disagreements on issues including the price of about VND30,000 a share, he told reporters Feb. 28.
Vietnam's banks are saddled with the highest level of non- performing loans in Southeast Asia. Prime Minister Nguyen Tan Dung said last month that rising bad loans are obstructing economic growth.
Japanese banks are seeking to diversify as falling interest rates squeeze loan profitability. Customer deposits held by Japan's banks exceeded loans by 171 trillion yen in November, close to a record 174.1 trillion yen in June, according to data compiled by Bloomberg based on central bank figures.
Mitsubishi UFJ today agreed to purchase Bank of America Corp.'s 49 percent stake in their Japanese private banking venture, Mitsubishi UFJ Merrill Lynch PB Securities Co. The value of the stake is about 39 billion yen, two people with knowledge of the matter said yesterday.