The Vietnamese government is falling behind its stretch goal of having 13 domestic joint-stock commercial banks listed in 2020, as there has been insufficient investor interest and market liquidity due to the pandemic and the small sizes of IPO candidates, analysts say.

Only three banks — Viet Capital Commercial Joint Stock Bank, Nam A Commercial Joint Stock Bank and Saigon Bank for Industry & Trade — floated their shares this year. Among the remaining 10 unlisted lenders, Southeast Asia Commercial Joint Stock Bank's board approved an IPO plan in August but has yet to announce a listing date, while Vietnam Maritime Commercial Joint Stock Bank shelved its listing plan, Vietnam Investment Review reported.

The listing target is part of the country's renewed push of the restructuring of state-owned enterprises and the banking sector. The policy goal of having all 31 domestic joint-stock commercial banks listed is to help lenders raise capital to meet Basel II standards and improve corporate governance.

"We could see bank listings happening gradually once the equity markets recover and outlook improves further," Ramesh Manimekalanandan, regional head of equity capital markets at Maybank Investment Bank Bhd., told S&P Global Market Intelligence.

"There have been signs of improvement recently, however, there will need to be a more broad-based recovery to attract global investor appetite at a scale necessary to ensure successful IPOs."

Choice of venue

The three newly listed banks are trading on the Unlisted Public Company Market, a preparatory trading venue run by the Hanoi Stock Exchange that public companies usually go to before listing on the two other main stock exchanges in Hanoi and Ho Chi Minh City.

The government might also still be keen to have banks trade on UPCoM if a listing on the Hanoi Stock Exchange is not possible, Manimekalanandan added.

Tran Khanh Hien, acting head of research at VN Direct Securities Corp., added: "For banks who do not target to attract the intention of foreign investors ... this is a good opportunity to go public or move to the main bourse."

"Viet Capital Commercial Bank and Nam A Commercial Bank [...] are small-sized banks and do not target foreign investors. [Meanwhile,] Vietnam International Commercial Joint Stock Bank and LienViet Post Joint Stock Commercial Bank, which have just moved to the main bourse, are traded at full foreign ownership limit [cap]," she said.

Tough to sell

The 10 unlisted banks are relatively small players in the industry. According to data from S&P Global Market Intelligence, those unlisted banks represent only 8.97% of total assets of all local joint-stock commercial banks in the country.

"Most IPOs in [Southeast Asia] post-COVID lockdowns have been in marquee or household names that investors are very familiar with," he said. "In the Vietnamese context, we still see investor interest mainly in the larger listed banks."

As an industry, the Vietnam banking sector is still on its road to recovery. Credit growth is expected to improve from its current rate of between 9% and 10%, Manimekalanandan said, while net interest margins have also widened and restructured loans are showing signs of stability. According to S&P Global Market Intelligence data, the net interest margin of Vietnamese banks are 3.16% as at end-2019.

"Banks might still need to make provisions in the first half of 2021, but overall we expect the issuance environment to improve in the second half of 2021," Manimekalanandan said.

Beyond banking

Companies in the country have been struggling to go public after 2018, analysts say, citing a challenging market environment that extends beyond the banking sector.

"There was lack of noticeable IPOs in 2019 due to the choppy performance of Vietnam stock market, when liquidity slumped 26% versus 2018," said VN Direct's Tran. "And then the COVID-19 outbreak in early 2020 has delayed some large IPOs such as Bamboo Airways, Maritime Bank and FE Credit, a consumer finance subsidiary of Vietnam Prosperity JSCB."

Even as the equity markets started recovering from April onward, the market rally in Vietnam is mainly driven by local retail investors while foreign investors are still acting as net sellers, she added. This is different from the rally in 2018, which was mainly fueled by foreign investors.

Maybank's Manimekalanandan shared the sentiment, noting that foreign investor's participation has been limited compared to two years prior.

"Companies that missed the wave [to IPO] in 2018 have been looking at private capital raising options during this period," he said.

"Market volumes have shown signs of improvement recently, however, foreign investor sentiment is still cautious with US$0.6 billion of outflows, [compared with] US$1.8 billion of inflows in 2018."

As of Nov. 30, US$1 was equivalent to 23,221 Vietnamese dong.