The Vietnamese government has raised the foreign ownership limit for three banks involved in the mandatory transfer of so-called “zero dong” banks, or troubled banks that the State Bank of Vietnam (SBV) has taken over at no cost due to their poor financial health, to 49% from 30%, effective 19 May.

This will provide the acquiring banks with greater flexibility in capital management through raising larger capital from foreign partners and hence is credit positive. The banks' capital raising, if successful, will increase buffers to offset risks from accelerated loan growth.

The three banks that have received the higher foreign shareholding limit are Military Commercial Joint Stock Bank (MB, Ba3 stable, ba3), Vietnam Prosperity Jt. Stk. Commercial Bank (VPBank, Ba3 stable, ba3) and Ho Chi Minh City Development JSC Bank (HDBank, B1 negative, b2).

In January 2025, the banks, as well as JSC Bank for Foreign Trade of Vietnam (Vietcombank, Ba2 stable, ba3), acquired four zero dong banks. Vietcombank is excluded from the scope of the new decree because of its majority state-owned status.

Foreign shareholders accounted for about 17%, 23% and 28% of total shareholdings in HDBank, MB and VPBank, respectively. Sumitomo Mitsui Banking Corporation (SMBC, A1 stable, a3) owns a 15% stake in VPBank and a 49% stake in VPBank's 50%-owned subsidiary, VPBank SMBC Finance Company Limited (FE Credit, B1 negative). With the higher foreign ownership limit, the banks will have flexibility to raise additional capital via stake sales to existing or new strategic partners.

Under the mandatory transfer plan, the acquiring banks will provide management support to the zero dong banks to help improve their financial performance. As an incentive, the SBV allocated higher credit growth limits to the four banks. The acquiring banks are not required to consolidate the weak banks.

In 2024, HDBank, MB and VPBank grew their loans by 29%, 27% and 22%, respectively, faster than the 18% average across rated Vietnamese banks. The accelerated loan growth will pose unseasoned loan risks to these banks as some of the new loans have not been tested over time for their performance and reliability.

Moody's Ratings Report redisseminated by The Asian Banker.