BIDV, Vietnam's second-largest listed bank with a market capitalization of $5.26 billion, said it will issue 603.3 million new shares for the stake sale. It pegged the deal value at 20.295 trillion dong ($874 million).

The stake sale is the latest large investment by a South Korean firm in the Southeast Asian country, after conglomerate SK Group in May agreed to buy a 6.1% of Vietnam's largest firm, Vingroup JSC, for $1 billion.

Vietnam caps foreign ownership in local banks at 30%, but has allowed some overseas banks to open wholly-owned units.

Hana Financial said in a regulatory filing the purchase of the BIDV stake will facilitate its entry into the Vietnamese market and secure sources for its mid- to long-term growth.

Vietnamese banks need as much as $20 billion in the run-up to the adoption of Basel II standards, scheduled for Jan. 1, 2020, Fitch Ratings said in a note last week.

Vietnam's Military Commercial Joint Stock Bank said last week it was seeking to sell a 7.5% stake to one or more foreign investors this year.

South Korea is the largest source of foreign direct investment in Vietnam, which has over recent years become a production base for several companies such as Samsung Electronics and LG Electronics Inc .

($1 = 1,176.27 won)

($1 = 23,217 dong)

(Reporting by Ju-min Park and Khanh Vu; Editing by Muralikumar Anantharaman and Himani Sarkar)

By Ju-min Park and Khanh Vu