Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

(Updated )

Five years is a long time in banking. The same Vietnamese lenders who were the pariahs of Southeast Asia in 2012 because of their bad-loan burden are now among the region's healthiest. With Prime Minister Nguyen Xuan Phuc saying he'll raise the foreign-ownership limit for banks from the current 30 percent, investors should get their checkbooks ready.

Singapore's sovereign wealth fund had a chance to get into the game early. In August, GIC Pte. agreed to buy a 7.7 percent stake in Bank for Foreign Trade of Vietnam JSC, a.k.a. Vietcombank, for less than $400 million, effectively valuing the lender at under $5.2 billion. The deal has yet to be concluded. Four months later, Vietcombank's market capitalization stands at $6 billion, and brokerage Ho Chi Minh City Securities Corp. is forecasting a 34 percent jump in pretax profit this year as provision expenses for bad loans drop by 25 percent.

Vietcombank shares, which rallied as much as 4.8 percent Tuesday, trade slightly below 3 times price-to-book. That may not sound like a bargain, but if an investor wanted to buy a bank with a return on assets of at least 1 percent, annual balance sheet expansion of more than 15 percent over five years, and nonperforming assets less than 15 percent of total, then the Hanoi-based lender is the cheapest among mid-sized Asian peers.  As Gadfly noted earlier, with property markets stable and lending accelerating, Vietnam's banks are among the region's most appealing.

Better Shock Absorbers
Most large Vietnamese banks have boosted provisions to deal with losses on bad loans
Source: Bloomberg
*Loan-loss provision as a ratio of nonperforming assets.

More importantly, they're also available. Or at least that's what the prime minister told Bloomberg News, indicating a willingness to sell troubled institutions -- such as OceanBank, which was taken over by the State Bank of Vietnam in 2015 -- in their entirety.

Controlling stakes in emerging Asian banks are hard to come by. China restricts investment in its lenders by any single foreign entity to 20 percent, and has stymied expansion by international players in its domestic market. India has pursued a similar strategy.

Indonesia used foreigners' money to recapitalize its banking system following the 1997-98 Asian crisis. But of late, it, too, has become less open. In 2013, Indonesian regulators rebuffed Singapore lender DBS Group Holdings Ltd.'s $6.5 billion bid for PT Bank Danamon Indonesia.

Where nationalism isn't a show stopper, pricing could be. Mizuho Financial Group Inc.'s offer for Philippine lender Bank of Commerce failed to impress San Miguel Corp., the seller. After the deal fell through, San Miguel decided to keep it after all.

Going Places
Shares in Vietcombank have risen 172 percent over the past five years
Source: Bloomberg

Vietnam, therefore, offers a rare opportunity, though not perhaps for punters. Even with steady 6 percent-plus GDP growth this year, Vietnamese banks may not do spectacularly well. Asset quality, while stable, is still weak, according to Moody's Investors Service, and net interest margins should slightly compress in 2017 because of strong competition.

Patient investors, however, would do well to bet on the country's ongoing modernization. The country of 96 million still sells a lot of textiles, shoes, seafood, coffee and cashew nuts. But thanks to Samsung Electronics Co., the country's No.1 export is now smartphone parts, which is creating opportunities for banks to finance both small and mid-sized businesses as well as a growing middle class.

Private equity is already is in love with Vietnam, buying into everything from a children's lifestyle company to a builder that makes apartments for younger customers. A sizeable stake in a bank may be the icing on the cake. If the communist government is ready to sell at a reasonable price, deals won't go begging for want of money.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(An earlier version of this column was corrected to amend the status of the GIC deal in second paragraph.)

  1. Valued between $5 billion and $10 billion.

To contact the author of this story:
Andy Mukherjee in Singapore at

To contact the editor responsible for this story:
Katrina Nicholas at