* MUFG aims to close 60 bln yen deal for 20 pct stake in H1 2013
* MUFG is last of Japan's three large banks to buy into Vietnam bank
* Vietnam banking sector hit by slowing growth, rising debt
* Japan's cash-rich banks looking to SE Asia for growth
By Taiga Uranaka and Emi Emoto
TOKYO, Dec 13 (Reuters) - Japan's Bank of Tokyo-Mitsubishi UFJ plans to buy 20 percent of VietinBank from the Vietnamese government for about 60 billion yen ($720 million), a source close to the deal said, as Japan's cash-rich big banks expand into fast-growing Southeast Asian markets.
The deal by the core retail and commercial bank of Mitsubishi UFJ Financial Group Inc (MUFG) for a stake in Vietnam's second-largest partly private lender will mean all three of Japan's megabanks have a stake in Vietnam's wobbly banking sector.
It also highlights an overseas buying spree by Japanese firms fuelled by a strong yen, abundant cash and limited growth opportunities at home. Japanese firms have spent a record $83.8 billion on outbound mergers and acquisitions this year, one fifth more than a year ago and the highest in Asia, according to Thomson Reuters data.
Bank of Tokyo-Mitsubishi UFJ hopes to complete the deal in the first half of next year, the source said.
In April, a senior executive of the bank told Reuters in an interview that it may spend more than $12 billion in the next three years on overseas acquisitions to diversify from a slowing domestic market.
BANKING UNDER STRAIN
VietinBank, or Vietnam Joint Stock Commercial Bank for Industry and Trade, said on Wednesday its 2012 gross profit may fall 11 percent to 7.5 trillion dong ($360 million) instead of rising 7 percent as earlier forecast.
Four years of economic volatility and sky-high inflation, coupled with tumbling asset prices, have put the Vietnamese banking system under strain.
Banking reform has stalled as the authorities focus on tackling a slowdown in economic growth, despite worries that many of the country's banks are in poor financial health.
The decline in growth, which the government recently forecast at 5.1 percent this year compared with a prior target of 6.0 to 6.5 percent, has saddled businesses with rising debt and boosted the banking system's bad-debt ratio to 8.82 percent as of end-September.
The VietinBank deal follows Mizuho Financial Group Inc's $760 million acquisition last year of 15 percent of Vietcombank, or The Bank for Foreign Trade of Vietnam, and Sumitomo Mitsui Financial Group Inc's $225 million purchase of a 15 percent stake in Vietnam Export Import Bank in 2008.
Faced with weak prospects in Japan, the big banks are looking to growing markets in Asia, especially in Southeast Asia, where political risks are perceived as less than those in China.