M&As in banking field will increase sharply when the banking competition is tenser and more foreign banks join Vietnamese market after Central Bank issued Circular No 04/2010/TT-NHNN dated February 11, 2010 regulating the merger and acquisition operations (M&As) of credit institutions was issued, specialists said.
One specialist said that foreign banks have undergone the financial crisis, showed by the satisfactory business results of the last two years. No bank had to face capture risks like in US. However, reacting against the exciting operation of foreign wholly invested banks, M&As will soon break out.
In line with WTO commitments, Vietnam allowed foreign banks to set up 100 percent invested subsidiaries here from April 1, 2007 and to date there have been five foreign subsidiary banks in Vietnam, showing the high potential, opportunity and integration of Vietnam's business generally and finance particularly. Also, the commitment will help upgrade the competitive strength and development of Vietnam's banking system and boost Vietnam's FDI attraction.
The bigger development of Vietnamese finance market encourages M&As, factually many big banks bought back stake of smaller ones. Typically, Maritime Bank and its big shareholder group purchased back nearly 49 percent capital of Mekong Bank (former MyXuyen Bank). However, M&As in banking field takes place more slowly than other sectors. First off, from now to the year end, more M&A deals could happen in small sized banks because these banks had to face difficulties in capital increase to reach the compulsory minimum cap of three trillion dong pursuant to Decree No 141/2006/ND-CP.
According to Nguyen Quoc Toan, Chief Executive Officer (CEO) of Capital Partners NTK Co, the firm has finished three M&A deals since the start of 2010. But no deal belongs to the finance field. Circular No 04/2010/TT-NHNN is the base for implementing M&As of credit institutions but M&As in the banking sector is not diversified. Banks only buy back a part of each other's stake and no bank takes over entire other bank, Toan reported.
Head of Saigon Asset Management's stock management division, Duong Cam Da said, M&As among banks will break out in the forthcoming time when small banks are forced to increase capital and liquidity. In Vietnam, both seller and buyer are hard to reach a price agreement as conducting M&A deals that's why Vietcombank (VCB), Vietinbank (CTG) to date have not been able to find out any strategic shareholder. Small banks in Vietnam are still rush to expand investment and business towards an expected stock price and then seek particular investors.
Truong Thanh Duc, chair of Basico law firm forecasted there will be more merger deals implemented. As for small sized banks, merger is the best solution.
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