SMBC in Talks to Boost VPBank Stake to 20%, Reuters Reports

Sumitomo Mitsui Banking Corp. (SMBC) is in advanced talks to increase its stake in Vietnam Prosperity Joint Stock Commercial Bank (VPBank) from 15% to approximately 20%, according to a Reuters report citing sources familiar with the matter. The potential deal underscores the Japanese lender's strategy to expand its footprint in Southeast Asia's high-growth economies.

Valuation Remains a Hurdle

The two banks are aiming to finalize a transaction this year, but negotiations have been complicated by disagreements over valuation, the report said. VPBank is reportedly seeking a substantial premium over its current market price.

SMBC, the core banking unit of Sumitomo Mitsui Financial Group, is said to be hesitant to pay the roughly 40% premium it agreed to for its initial investment in 2023. As an alternative to a private placement, SMBC has reportedly considered acquiring the additional shares on the open market. At current prices, a 5% stake in VPBank is valued at approximately $425 million.

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Strategic Context

This move follows SMBC's $1.5 billion investment in 2023 to acquire its initial 15% stake in VPBank. A larger stake would provide the Japanese bank with deeper access to Vietnam's consumer and business banking sectors, including the insurance and credit markets, while also supporting its Japanese corporate clients operating in the country.

Separately, VPBank is also in discussions regarding another share sale to foreign investors, which could raise between $700 million and $900 million, according to the Reuters report. This indicates a broader capital-raising strategy by the Vietnamese lender.