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HANOI ─ Foreign banks are seeking a bigger foothold in Vietnam by extending hard-currency loans to local lenders squeezed between rising domestic funding costs and government pressure to expand credit to meet ambitious economic growth targets, bankers and analysts said.
The growing reliance on offshore funding highlights a central challenge for Communist Party chief To Lam’s economic agenda, with banks expected to bankroll most of the planned infrastructure projects worth about $200 billion and support annual growth of at least 10 percent through 2030 despite mounting funding strains.
Chinese, Taiwanese and Middle Eastern banks are among those said to have shown interest as Vietnamese lenders seek offshore funding, said Willie Tanoto of Fitch Ratings, noting the size of discussed syndicated deals has reportedly been around several hundred million dollars.
Several foreign banks operate in Vietnam through branches, and more could enter under the government’s plan to establish international financial centers, analysts said, though key details remain unclear.
Japanese and South Korean banks are already strategic investors in some of the country’s largest lenders.
Lenders included Standard Chartered, Germany’s Commerzbank and Japan’s MUFG Bank.
That followed a $1.44 billion offshore loan signed in June by VPBank, one of Vietnam’s largest private banks, with Japan’s Sumitomo Mitsui playing a key role in the deal.
Techcombank, another top private bank, is also seeking a foreign loan of $1 billion pending regulatory approval, its CEO Jens Lottner told Reuters, confirming an earlier Bloomberg report.
“As domestic interest rates are rising, this becomes economically sensible again for medium to long term funding,” he said, noting the bank raised a similar amount overseas in 2022 and routinely taps international markets when conditions are favorable, including currently, with dollar funding relatively cheap.
“I think there is appetite for Vietnam,” Lottner said.
Interest rates on long-term deposits in Vietnam rose in June to a range of 5.9 percent-7.8 percent from 4.8 percent-7.1 percent a year earlier, according to the central bank, amid high inflation.
Offshore loans to Vietnamese banks often carry interest below those paid on domestic deposits, one consultant at a Vietnam-based securities firm said, declining to be named because the information was not public.
Offshore borrowing appears to be increasing, but many of the transactions are bilateral, making it difficult to estimate the total amount raised, Tanoto said.
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