BIDV, one of Vietnam’s four state-run commercial banks, is seeking shareholders to sell 17.65 percent of its current charter capital to South Korea’s KEB Hana Bank.

The Hanoi-based bank, known in full name as the Bank for Investment and Development of Vietnam, plans to raise its registered capital to more than VND40.22 trillion (US$1.72 billion) by issuing over 603 million shares, the lender said in a document sent to shareholders.

Following the capital raise, KEB Hana Bank will hold a 15 percent stake at BIDV and become its strategic foreign partner.

If the deal goes through, state ownership at BIDV will drop from 95.28 percent to 80.99 percent.

The South Korean lender is barred from transferring the BIDV shares it owns to another party for at least five years after becoming a stakeholder, according to the plan.

The Seoul-based bank, established in 1967, is the fifth largest bank in assets in South Korea.

BIDV also seeks shareholder permission to revise its charter to replace the general director with the chairman of the board as its legal representative.

The bank has not had a chairman since its former chairman Tran Bac Ha retired in September 2016.

BIDV’s plans come as Vietnam seeks to reform its fragmented banking sector, which is weighed down with bad debts after a decade of rapid expansion and is overcrowded with many small and under-capitalized operators, according to Reuters.

Vietnamese banks are permitted to have a foreign shareholding of up to 30 percent, with a single strategic partner allowed to hold a maximum 20 percent stake.

Special cases can be made, however, for larger foreign stakes in banks designated as ‘weak’ by the State Bank of Vietnam.

The Southeast Asian country now has four state-run banks, including BIDV, Agribank, Vietinbank, and Vietconbank, along with a military-run lender, MB Bank. 

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