Vietnam’s Banking Sector: Opportunities and Risks for Foreign Investors

Posted by Written by Mark Barnes Reading Time: 5 minutes

Vietnam’s banking sector is under pressure with a number of big banks requesting increases to current foreign ownership limits. This could open the sector to a wealth of opportunities and participation of foreign financial and banking entities. In this article, we provide an overview of Vietnam’s banking sector for foreign firms.

The potential for mergers and acquisitions in Vietnam’s banking sector is increasing as domestic banks seek foreign capital to address challenges, such as rising non-performing loans and credit growth limits, which have hindered lending. In addition, foreign investment may help mitigate the sector’s exposure to real estate bonds in the fledgling Vietnamese bond market.

However, the banking industry is a regulated business line in Vietnam, and foreign investment is generally limited to 30 percent. Banks may exceed this limit with special permission, which some have recently requested due to the sector’s challenges. If these challenges persist, permission may be granted to exceed the foreign ownership limit..

Firms open to investing in Vietnamese banks must have a thorough understanding of the country’s banking sector and what foreign partnerships may entail.

Foreign ownership limits

Decree No. 01/2004/ND-CP from 2014 outlines the foreign ownership limits for Vietnamese banks. In general, foreign investment is restricted to a maximum of 30 percent of a bank’s charter capital.

However, the exact limit for a foreign investor depends on their type:

  • Foreign individuals are limited to owning no more than 5 percent of a bank’s charter capital.
  • Foreign institutions can own a maximum of 15 percent of the charter capital of a Vietnamese credit institution unless they are deemed “foreign strategic investors” (see next point).
  • Foreign strategic investors are capped at 20 percent of the charter capital.
  • Foreign investors are limited to owning no more than 20 percent of a bank’s charter capital.

Caveat for circumventing foreign ownership limits

The limits mentioned above can be circumvented in some circumstances.

Provisions in Decree No 01/2004/ND-CP allow for ‘special cases.’ This is defined as when a bank is ‘weak’ and needs to restructure in order to ensure the stability of the banking system. In these circumstances, foreign ownership limits can be lifted at the discretion of the Prime Minister.

Partnerships with Vietnamese banks in the past

A vast number of foreign firms have bought into Vietnamese banks in the past. These investors have come from countries all around the world. We briefly spotlight some well-known examples below.

Deutsche Bank-Habubank

In 2007, Germany’s Deutsche Bank bought a 10 percent stake in Vietnam’s Habubank (HBB). Five years later, however, the bank was struggling and, looking for a way out, it merged with Vietnam’s SHB Bank. This diluted Deutshbank’s share in the merged entity to just five percent. As a result, Deutsche Bank was recategorized from a strategic shareholder to an investor and lost its voting rights.


In March of 2005, Australia’s ANZ Bank and Vietnam’s Sacombank announced they would be entering a strategic partnership. This partnership would see ANZ buy a 9.87 percent stake in Sacombank for US$27 million. Five years later, however, plans to divest out of Sacombank were made clear. Two years after that, ANZ had sold its stake to Eximbank marking the first time a foreign investor had divested out of a Vietnamese bank.


In 2005, HSBC announced it would be buying a 10 percent stake in Vietnam’s Techcombank. Ten years later, in 2017, it sold its shares in their entirety. The two banks appear to still be on good terms with HSBC helping to arrange a US$1 billion syndicated loan for Techcombank just last year.

Why foreign and Vietnamese banks often separate

Over the last decade or so, investing in Vietnamese banks has been popular, but not without its challenges. A number of firms have both entered and exited the market for a range of reasons.


Limits to foreign investment and a booming economy may be creating competition among investors. This looks to be driving up the value of shares that can be owned by foreign firms or individuals. For example, when Oversea-Chinese Banking Corporation (OCBC) sold its stake in Vietnam’s VPBank. This was not due to problems in their relationships but rather that the offer made was ‘too good’ to refuse, according to VN Express.


When HSBC and Techcombank chose to go their separate ways, management problems were rumored to be the driving force. With the current foreign ownership limits, there is a distinct power imbalance between foreign investors and domestic firms. This can create friction as the two entities struggle to align their goals, aims, interests, and processes.

Conditions on the ground

Back in February, Andreas Stoffers, the country director of the Friedrich Naumann Foundation Vietnam and a former board member of Deutsche Bank Vietnam, told The Investor that “…caps on interest rates, rampant gray market banks, problematic risk management… and a tough struggle to introduce new products, especially in the investment and insurance sectors”, all made doing business in Vietnam’s banking sector difficult.

He did, however, go on to suggest that these challenges were surmountable if firms took the time and made an effort to understand the unique nature of Vietnam’s banking sector and the cultural nuances that underpin it.

Trends in Vietnam’s banking sector

The current state of Vietnam’s banking sector is mixed. While some banks move from strength-to-strength, others are prone to burdening themselves with risk. Nonetheless, the sector is steadily growing and evolving.

Digital payments are becoming increasingly popular

By at least one estimate, the e-wallet market in Vietnam could have as many as 50 million users by next year. This is on the back of a booming e-commerce industry and fintech sector, which are both fueling demand for digitization in banking.

More and more Vietnamese have access to the internet every day, and as mobile technology continues to proliferate, digital payments are entering a heyday that should last for some time to come.

Near-term risk is growing

In the near-term, risk is growing among Vietnamese banks. Moody’s downgraded Vietnam’s banking sector from positive to stable in January this year as real estate sector woes took their toll.

Specifically, a number of banks were overly exposed to Vietnam’s bond market and real estate bonds. It has recently come to light that many of these bonds were issued as part of nefarious activities on the part of their issuers and there is some uncertainty as to whether they can be paid back.

Foreign investment is increasing

Over the past year, foreign investment in Vietnamese banks has been on the rise. For instance, Nam A Bank received a US$20 million investment from Switzerland’s BlueOrchard Finance.

The FTSE Russell and MVIS index funds also added several Vietnamese banking stocks to their portfolios, which VN Economy estimates will bring in tens of millions of dollars to the sector.

In addition, Japan’s Sumitomo Mitsui Banking Corporation (SMBC) acquired a 15 percent stake in Vietnam’s VP Bank in March.

Given Vietnamese banks’ efforts to expand foreign investor limits and the challenges facing the sector, this trend is likely to continue in the future.

See also: Vietnam’s Real Estate Sector Turmoil: Explained

Key takeaways

Vietnam’s banking sector is currently facing challenges, making foreign investment an attractive option to strengthen balance sheets. However, foreign ownership limits remain a significant obstacle that needs to be overcome.

The decision to lift the cap is currently at the discretion of the Prime Minister, although it has been done several times in the past. With the sector facing mounting economic pressure, it is increasingly likely that the cap will be lifted in the near future.

If the foreign ownership limits are indeed lifted, it could present numerous opportunities for foreign investors. However, it is crucial to note that challenges have arisen between domestic banks and their foreign investors in the past. Therefore, foreign firms interested in investing in Vietnam’s banking sector should carefully consider these challenges before making any decisions.

For more information on the nuances of owning a share in a Vietnamese bank, foreign firms should consider engaging the business advisory team at Dezan Shira and Associates.

About Us

Vietnam Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in HanoiHo Chi Minh City, and Da Nang. Readers may write to for more support on doing business in Vietnam.

We also maintain offices or have alliance partners assisting foreign investors in IndonesiaIndiaSingaporeThe PhilippinesMalaysiaThailandItalyGermany, and the United States, in addition to practices in Bangladesh and Russia.