JAPAN'S biggest bank Mitsubishi UFJ has bought a 20 per cent stake worth $US743 million ($A719.37 million) in state-owned VietinBank, the largest merger or acquisition deal ever in Vietnam's banking sector.
The deal aims to boost "support for Japanese companies operating in Vietnam", Bank of Tokyo-Mitsubishi UFJ president Nobuyuki Hirano said on Thursday.
The bank also aims to tap Southeast Asian markets after seeing its profits tumble this year.
Last month, it reported profit in the six months to September had dived 58 per cent year-on-year to $US3.6 billion, due partly to declines in stock holdings.
VietinBank, or Vietnam Joint Stock Commercial Bank for Industry and Trade, said the State Bank of Vietnam will still own the majority of its shares but described the deal as "the largest-ever M&A (mergers and acquisitions) transaction" in the country's banking sector.
It is also "the most important investment by a foreign partner in the banking sector in Vietnam", Le Tham Duong, a professor at the Banking University in Ho Chi Minh-City, told AFP on Thursday.
Japanese investment in Vietnam has increased in recent years, with another Japanese bank, Mizuho Financial Group Inc, buying a 15 per cent stake in Vietcombank, Vietnam's largest listed bank by market value, for nearly $US570 million in September 2011.
After a decade of rapid and chaotic bank liberalisation, Vietnam now has 42 domestic banks. Many are overloaded with toxic debt, much of it held by inefficient and poorly-managed state-owned companies.
The government has renewed a high-profile anti-corruption drive, focusing on the heads of failing state enterprises and wealthy banking tycoons to ease rising public dissatisfaction over the slowing economy.
It was forced to take action after a fraud scandal broke at Asia Commercial Bank, triggering a run on deposits and forcing Vietnam's central bank to provide emergency liquidity to the institution.
Analysts stress the need to woo more foreign players into the nation's crisis-hit banking sector to inject new cash and greater expertise.
In September, Moody's downgraded Vietnam's credit rating from "B1" to "B2", citing weaknesses in the banking system that may hit medium-term growth, and "an elevated risk" of a costly government banking bailout.
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