MUFG unit to take stake in Vietin Bank Bank of Tokyo Mitsubishi, the core bank in the Mitsubishi UFJ Financial Group, is to take a 20 per cent stake in Vietin Bank for $742m, the largest investment in Vietnam to date by a Japanese lender. The deal, which comes as Japan's top three mega-banks have been expanding their overseas operations to compensate for sluggish loan demand at home, highlights the interest in southeast Asia's growing market for credit. Rival SMFG said this week it plans to expand its consumer finance business to target the growing middle classes in southeast Asia. The investment in Vietin Bank, the country's second-largest lender by total assets, will help BTMU enhance its cash management and settlement services in Vietnam, the bank said on Thursday. BTMU in turn will provide technical support to help the Vietnamese bank develop areas such as risk management. BTMU is buying the shares from the Vietnamese government, which will retain a 64 per cent stake in the bank. "Vietnam has achieved consistently high economic growth for a long time and represents a market with high potential for the further expansion of financial services," BTMU said. Loan demand in Vietnam has grown by a compounded annual growth rate of nearly 28 per cent between 2007 and 2011, to 2,830tn dong ($136bn), according to Business Monitor International, a London-based think-tank. Vietnam's real gross domestic product, meanwhile, has grown by a compound annual growth rate of 6.1 per cent during that period, to 584tn dong in 2011. In the four years to 2011, Vietin Bank's loans have increased by a compound annual growth rate of 30 per cent to 293tn dong, while BTMU's loans in Japan have fallen from Y71tn to Y65tn as of last year. Deposits at Japan's banks exceeded loans by Y171tn last month, according to the Bank of Japan. Mizuho, Japan's third-largest bank by market value, last year agreed to buy a 15 per cent in Vietcombank, for about $570m. Sumitomo Mitsui Bank paid $225m for 15 per cent of Eximbank of Vietnam in 2007, becoming its largest shareholder. Vietnam has benefited from Japanese investment in recent years as Japanese companies have sought to diversify their manufacturing bases away from China, where they face rising wages and the impact of political tensions. Japan was Vietnam's third-largest investor in 2011, behind Hong Kong and Singapore, in terms of the total value of investments, according to the Japan External Trade Organization. Although the value of foreign direct investment by Japanese companies fell from $2bn in 2010 to $1.8bn last year, the number of investment cases hit a record, Jetro said. Japanese companies are attracted to Vietnam's lower wages, which are about one quarter of the levels in China and Thailand, according to Jetro.