Cross-border funds required to advance banking expansion

Privately held lender Nam A Bank last week announced it has mobilised a fresh loan of $20 million from BlueOrchard, a global impact investment manager dedicating to fostering inclusive and climate-smart growth, to grow its loan portfolio in small- and medium-sized enterprises (SMEs).

BlueOrchard was founded in 2001 as an initiative of the UN, and the world’s first commercial manager of microfinance debt investments worldwide. Today, it provides investors around the world with premium investment solutions, including credit, private equity, and sustainable infrastructure, as well as debt and equity financing to institutions in emerging and frontier markets.

The company has invested around $10 billion in more than 100 countries and territories, creating lasting positive impact for underserved communities and the environment.

A BlueOrchard representative said, “We believe that Nam A Bank will efficiently utilise this source and contribute to the bank’s growth due to its stable financial potential, sustainable vision, and effective development plan.”

Nam A Bank was one among the first Vietnamese banks to embrace digital transformation, risk management, network growth, and community involvement, and it continues to be a leader in these areas.

Earlier this month, the International Finance Corporation (IFC) also invested $100 million in BRG-backed SeABank in a bid to bolster the bank’s ability to provide housing loans. Through this initiative, SeABank anticipates doubling the number of low- and middle-tier mortgages by 2026 amidst Vietnam’s rapid urbanisation rate of around 3 per cent annually.

“SeABank is honoured to once again gain valuable trust from the IFC to boost home financing. This latest deal brings total IFC investment in the bank to about $400 million,” said Le Thu Thuy, who is vice chairwoman of the board at SeABank.

Thomas Jacobs, IFC country manager for Vietnam, Cambodia and Laos, said, “Limited housing supply along with rising demand has aggravated the housing shortage for lower and middle-income earners in Vietnam’s cities, leaving many people simply unable to access the funds they need to buy a home.”

Jacobs also added that the IFC aimed to enhance long-term funds supply for mortgage lending in emerging markets, allowing access to better quality housing, promoting inclusive development, and creating more jobs.

Last October, the IFC also invested a $75 million convertible loan in SeABank with an option to convert it to common shares of the bank within five years. The arrangement aims to boost the bank’s access to finance SMEs, especially those owned by women.

Techcom Securities (TCBS) also inked a $125 million unsecured loan syndication agreement in December last year, raising the total mobilised value of the foreign capital market during the last year to over $300 million. The $125 million syndicated loan is the third successful international capital raised by TCBS in 2022, after a syndicated loan of $170 million in April.

Four major financial institutions – CTBC Bank, Taishin International Bank, Sumitomo Mitsui Banking Corporation, and Maybank Securities (Singapore) – have co-arranged this fresh loan syndication.

Nguyen Tuan Cuong, deputy CEO of TCBS, said that the significant financing deal would help the security company to strengthen its position as one of the largest asset management technology companies in Vietnam in terms of equity, profitability and performance of core businesses.

Economist Nguyen Tri Hieu said domestic banks and companies successfully tapping into international financing sources demonstrate the confidence of foreign financial institutions in the long-term development of the Vietnamese economy.

“Amid the stringent funding sources from traditional channels such as corporate bonds, international loans are still feasible, and risk is reflected in specific interest rates. Foreign currency-nominated loans have also aided in resolving the issue of debt maturity pressure and debt restructuring,” Hieu said.

However, Vietnamese businesses must satisfy a set of stringent requirements to get access to these foreign sources, and these sources are only used for specific purpose loans. “As the Fed and other global central banks have indicated an intent to continue raising interest rates going forward, Vietnamese businesses will also bear the brunt of the cost of borrowing,” Hieu added.

Given current challenging fundraising and bleak merger and acquisition circumstances, a number of Vietnamese groups are looking to financing sources from overseas credit facilities to strengthen their resilience in the face of market fluctuations.