Foreign funds eye 49pct in DongA Bank, after the lender’s deal failure with Kinh Do

15-Aug-2015 Intellasia | Dealstreetasia | 6:00 AM Print This Post

Several foreign funds are eyeing a 49 per cent stake in the HCM City-based DongA Bank, after the lender failed to seal a 17 per cent deal with Vietnam’s leading confectionery and food firm Kinh Do Corporation, DEALSTREETASIA has learnt.

Sources familiar with the matter said that foreign investors have proposed to purchase up to 49 per cent equity of the bank, to become its strategic shareholders.

DongA Bank executives were not available for confirmation although we had reached out to the bank multiple times.

Last month during the bank’s shareholder meeting, its CEO Tran Phuong Binh had disclosed that Kinh Do plans to invest VND1 trillion ($46 million), to help the bank increase its charter capital to VND6 trillion, for a 17 per cent stake.

However, the food company earlier this month indicated that it will not carry out the plan citing the complicated financial problems with the bank.

However, according to sources, which cited Binh, Kinh Do will not be able to keep its position as the bank’s strategic investor in the future, when DongA Bank further increase its capital to VND10 trillion. With its VND1 trillion investment, Kinh Do will be left with only 10 per cent of the bank.

Meanwhile, the aforementioned funds are willing to buy 49 per cent of the VND10 trillion capital, which means they are committed to helping the lender handle its non-performing loan issue and restructuring the entire system.

If the partnership is done, DongA Bank will successfully restructure itself without the intervention of the State Bank of Vietnam, unlike the previous cases involving the Vietnam Construction Bank, the Ocean Bank and the Global Petro Bank.

The central bank had given a green light for it to have foreign strategic shareholders, said Binh, as cited by sources close to the development. “If things are smooth, we expect the deal will be reached within three to four months, and what we will focus on doing is addressing the bad debts,” Binh reportedly said.

During the recent shareholder meeting, DongA Bank’s chair Cao Sy Kiem, who is former governor of the central bank, was asked to resign after just a year of his term. However, the bank has decided to maintain the operation of the current management board until new investors come in.

DongA Bank’s pre-tax profit in 2014 reached VND35 billion, declining 96 per cent over the previous year. As a result, it will not conduct dividend payouts. Meanwhile, its credit growth was only one per cent, and bad debt ratio was 3.7 per cent, higher than the safety threshold of three per cent.

In addition, the Vietnamese central bank has released a list of 33 banks eligible to be guarantors of real estate projects, which does not include DongA Bank.

The release came less than one month following the guaranty and financing for home buyers contract between the bank and Phat Dat Real Estate Development JSC.


Category: Finance, Vietnam

Print This Post

Comments are closed.