The Vietnam Prosperity Bank (VPBank) announced on October 20 that it has completed a private placement transaction, selling 15 per cent of shares to the Sumitomo Mitsui Banking Corporation (SMBC), officially making Japan’s second-largest bank a strategic shareholder.

An agreement was reached in late March to privately issue VPBank shares to SMBC. Over 1.19 billion shares were then offered to SMBC, which is under the Sumitomo Mitsui Financial Group, Inc. (SMFG), with the total value of the issuance standing nearly $1.5 billion. All shares issued will be restricted from transfer for five years.

Ten per cent of the sale value was deposited by SMBC just before its Annual Shareholders’ Meeting last April. Approximately 90 per cent of the remaining transaction value will be recorded in the bank’s equity immediately after the completion of the transaction.

The sale agreement to SMBC is part of VPBank’s capital increase plan implemented since 2022 to strengthen its long-term financial capacity and help it achieve its growth targets in the third five-year development strategy (2022-2026). As a result, VPBank’s total equity will be raised from $4.2 billion to approximately $5.7 billion. The bank’s Capital Adequacy Ratio (CAR), calculated by international credit rating agency Moody’s, is expected to increase to nearly 19 per cent, taking the lead among banks in Vietnam evaluated by the agency.

The substantial capital foundation will significantly enhance VPBank’s financial strength in its effort to meet customers’ needs across strategic segments such as individual customers and small and medium-sized enterprises (SMEs). VPBank will also have sufficient financial capacity to serve large-scale corporate clients. Furthermore, SMBC is expected to contribute to VPBank’s growth by sharing secrets and experience the group has accumulated over many years in various Asian markets.

Through a local bank like VPBank, SMBC can increase its presence and open up opportunities to provide funding to large-scale investment projects in Vietnam, especially in areas such as infrastructure construction, green growth, and environmentally-friendly development, which SMFG is interested in.