Warburg Pincus to invest $370m in Vietnamese lender

This will be the largest private equity deal in the country. It follows earlier sizeable investments by Warburg Pincus in the likes of shopping mall operator Vincom Retail and an infrastructure platform backed by industrial conglomerate Becamex IDC. TCB will use the capital to support expansion and consolidate its position as one of Vietnam’s largest joint stock banks.

The bank announced plans last year to increase its charter capital from VND8.8 trillion ($386 million) to VND13.8 trillion through two share offerings. The first saw 70 million shares sold primarily to existing investors for VND30,000 apiece, raising VND2.1 trillion. A total of 430 million shares were expected to be issued in the second phase. Prior to starting the capital raise, TCB bought back HSBC’s stake in the business. Masan Group also trimmed its holding but remains a significant minority investor.

Established in 1993, TCB serves more than 5.4 million customers through a network of 315 branches and 1,117 ATMs nationwide. Total operating income reached VND16.1 trillion in 2017, up from VND11.6 trillion the previous year, while net income rose from VND3.1 trillion to VND6.8 trillion. The bank had gross loans to customers of VND164.8 trillion in 2017 and a non-performing loan ratio of 1.6%.

Warburg Pincus expects the investment to benefit from Vietnam’s strong economic fundamentals, notably upward consumption trends driven by a large and growing middle and upper-income population. Demographics are also favorable, with more than 60% of the 100 million overall population under the age of 40.

At the same time, the banking penetration rate is low, at just over 30% in 2017. This compares to 56% in Indonesia, 71% in Thailand, and 77% in Malaysia. The expectation of strong headroom for growth is supported by the threefold increase in total consumer loans in Vietnam between 2013 and 2016, with greater demand for products such as mortgages, auto loans, and credit cards.

“Vietnam is one of the fastest growing banking markets in Southeast Asia and TCB is well positioned with its leading retail franchise and best-in-class management team with strong local and international banking experience,” Jeffrey Perlman, head of Southeast Asia at Warburg Pincus, said in a statement.

Vincom Retail represented the private equity firm’s first investment in Southeast Asia. It led a consortium that committed $200 million in 2013 for a 20% stake and the contributed another $100 million in 2015. The company completed Vietnam’s largest-ever IPO last November, raising VND16.8 trillion. Warburg Pincus exited about two-thirds of its holding through the offering.

Total investment in the country now stands at more than $1 billion. In February, Warburg Pincus announced that the formation of BW Industrial Development in conjunction with Becamex IDC. The $200 million platform will focus on meeting local demand for warehousing and build-to-suit and ready-built factories.

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• Topics
• Southeast Asia
• Financials
• Expansion
• Vietnam
• Warburg Pincus Asia
• Financial Services
• Growth capital