Financial institutions taking initiative to secure profitability

The financial industry in Vietnam is gearing up for another major listing, marking an extension of the ongoing wave of Initial Public Offerings (IPOs). VPBank Securities' subsidiary is set to make its debut in November, with around 10% of its shares expected to be offered to the market.

In a similar vein, Techcom Securities is preparing for its IPO, with the subscription and deposit period running from August 19 to September 8. The indicative offering price for Techcom Securities is $1.87 per share, equivalent to a market capitalization of approximately $4.1 billion. If the IPO proceeds as scheduled, Techcom Securities could potentially propel itself past SSI to become the market leader by capitalization.

The move towards IPOs and expansion into the securities sector is not isolated. Many banks are restructuring their strategies, reallocating capital into higher-margin segments such as securities, asset management, and insurance. This shift is aimed at increasing fee-based income and developing a more integrated financial ecosystem.

Banks and their affiliated securities firms often work closely together to finance large corporations, particularly in real estate and renewable energy. The expansion into the securities sector allows banks to capitalise on the funding capacity and customer base of their parent banks to expand brokerage market share and bond distribution.

However, this expansion tends to weigh on the capital adequacy ratio (CAR) in the short term. To mitigate credit losses, it is essential for banks and affiliated securities firms to establish rigorous client selection criteria and to strengthen collateral management.

In addition to VPBank Securities and Techcom Securities, other banks like Sacombank, MSB, and SeABank have received shareholder approval to invest in or acquire stakes in securities firms and fund management companies. The goal is to convert these entities into subsidiaries.

PGBank has also approved a resolution to acquire shares in a securities company, fund management company, or insurance firm, with the intention of converting them into subsidiaries or affiliates. This trend of banks expanding into the securities sector is expected to continue, as the pressure to raise charter capital mounts, especially as Basel II and Basel III requirements are enforced more stringently.

As CAR declines, banks are looking for ways to increase their revenue streams. Expanding into the securities sector allows them to do just that, while also developing a more integrated financial ecosystem through their extensive customer networks. Despite the short-term challenges, the long-term benefits of this strategy are clear.