M&A promotes restructuring of weak banks

25-Nov-2022 Intellasia | Dau tu Chung khoan | 5:02 AM Print This Post

Weak banks have a new stop

Looking back over the past seven years, since Construction Commercial One Member Limited Liability Bank (CBBank), Ocean Commercial One Member Limited Liability Bank (Ocean Bank), and Global Petro Sole Member Limited Commercial Bank (GP Bank) were forced to buy zero dong due to losses, negative equity, the restructuring roadmap has not achieved results, although some partners, foreign strategic investors were interested in participating.

The Covid-19 pandemic has brought difficulties to the global economy and multinational corporations, so the business plans of foreign investors have made significant changes. Therefore, the plan to sell weak banks to foreign investors is difficult to succeed, the solution is to sell or merge into domestic banks with strong potential.

In addition to the three state-owned banks Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Joint Stock Commercial Bank of Industry and Trade (Vietinbank), Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), the top private joint stock commercial banks such as Military Joint Stock Commercial Bank (MBB), Vietnam Prosperity Joint Stock Commercial Bank (VPBank), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Hochiminh City Development Joint Stock Commercial Bank (HDBank), etc., are also capable of participating in this task. After Ocean Bank was accepted by MBB and CBBank was accepted by Vietcombank to carry out the next phase of restructuring, GPBank also seems to have a destination.

Recently, at the ceremony to announce the decisions to appoint senior leaders of GPBank, what attracted the attention of the market was the participation of leaders of VietinBank and VPBank. At the event, Pham Huy Thong was appointed to hold the position of Chair of the Board of Members, Ho Huu Minh held the position of a member of the Board of directors cum general director, Nguyen Quang Trung held the position of a member of the Board of directors, Nguyen Thi Huong holds the position of deputy general director of GPBank. In which, Pham Huy Thong used to be with VietinBank for a number of years. Similarly, Ho Huu Minh is a former officer of VietinBank.

In fact, the case where the personnel of a large bank participated in the restructuring of the bank ’0 dong’ and later the bank was officially handed over to the parent bank took place at Vietcombank, with employees who have been dispatched for a number of years at CBBank. Therefore, financial analysts speculate that VietinBank will participate in the restructuring of GPBank, but so far this has not come true.

In the group of banks that submitted to the general meeting of shareholders a programme to participate in weak banking restructuring in 2022, besides Vietcombank, MBB and most recently HDBank, which ‘targeted’ a specific address, VietinBank did not have this programme. Meanwhile, VPBank has been approved by the general Meeting of Shareholders to take part in the restructuring of credit institutions. A number of experts believe that VPBank may join in the restructuring of GPBank.

At the request of the government, the State Bank of Vietnam (SBV) is accelerating the implementation of restructuring weak credit institutions. If GPBank has a new stop, it means that all weak credit institutions in the system have completed a new start under the project on restructuring the system of credit institutions associated with bad debt settlement in the period of 2021 2025.

With OceanBank, this bank is said to be about to join MB. At the general Meeting of Shareholders in 2022, MB approved the plan to receive a compulsory transfer of a credit institution. At OceanBank’s 2022 business mission implementation conference, Luu Trung Thai, vice Chair of the Board of directors cum general director of MB, and Pham Nhu Anh, a member of the Board of Management cum director of MB’s CIB division all attended.

At that time, leaders of OceanBank said, one of the key tasks in 2022 is to coordinate with MB to carry out the syndicated loan programme, including retail lending; Research and develop a number of products for competitive advantage. MB’s general director said that the cooperation with OceanBank is both a political task and an opportunity for MB. According to the roadmap of SBV, MB will coordinate with OceanBank to check the data system and develop a plan to submit to the government.

Regarding the transfer price, MB’s leaders shared, the transfer price will be zero dong, however, the bank has to deal with accumulated losses. The condition MB offers is that the transferring bank must have accumulated losses of less than 20 trillion dong. According to calculations, MB merely takes seven to eight years to process all accumulated losses of the compulsory transferring bank, then it will be handled in three options: merging into MB, selling to other investors or initial public offering (IPO) to establish a new bank.

Dong A Bank another weak bank, HDBank the supporting unit

Waiting for M&A deals worth billions of US dollar

Right from the first months of 2022, Vietnam’s financial market has witnessed large-scale mergers and acquisitions (M&A) moves in the financial and banking sector. In which, VPBank wanted to sell 15 percent of shares to a foreign partner with the rumoured name of Sumitomo Mitsui Banking Corporation (SMBC). So it raised the maximum ownership rate (room) of foreign investors from 15 percent to 17.6 percent of capital. Not disclosing the time to complete the plan to sell capital to foreign investors, but a representative of VPBank said that this will be done in 2022 or 2023.

On the side of SMBC, recently, the Board of directors of Vietnam Joint Stock Export Import Bank (Eximbank) announced that Vo Quang Hien is no longer a member of the Board of directors, members of councils and committees under the bank, effective from 14/14. September 2022. Previously, in February 2022, Hien was the Managing director of Global Trade Finance Department at SMBC and was nominated by SMBC to join the Board of directors of Eximbank.

Notably, in mid-March 2022, SMBC issued a written notice on the termination of the strategic alliance agreement with Eximbank, leading the market to speculate that this Japanese investor would divest 15 percent of capital in Eximbank to opening the way to pour capital into VPBank, especially after the relationship between the two parties became close after the SMBC deal completed buying 49 percent of the charter capital of FE Credit (a financial company under VPBank).

Some other $ billion M&A deals may take place in the near future such as Vietcombank’s plan to privately offer 6.5 percent of its charter capital, which if successful, is estimated to earn approximately 30 trillion dong. Meanwhile, HDBank is being highly appreciated for its ability to sell shares to foreign investors, because the Bank has the prospect of expanding foreign room to 49 percent according to the schedule specified in the Vietnam Free Trade Agreement EU.

In mid-July, PricewaterhouseCoopers (PwC) said that, despite the macroeconomic obstacles, 2022 will be an exciting year for M&A transactions in Vietnam. M&A activities continue to attract the attention of foreign investment funds.

Earlier, Warrick Cleine, Chair and general director of KPMG Vietnam and Cambodia, forecast that M&A activities in the financial industry in Vietnam will remain vibrant. The reason is that the number of banks participating in the market is still large, while the government and SBV are gradually restructuring and streamlining the size of the banking system to grow strongly. Banks that are in the restructuring phase and weak small banks will find it difficult to avoid M&A.

However, according to financial analysts, in order to increase the attractiveness for foreign investors to participate in M&A deals in the banking sector, the foreign room should be raised above the current 30 percent level.

Andy Ho, CEO of VinaCapital, said that opening foreign rooms will help domestic banks to change quality and improve international competitiveness.

 

Category: Finance, Vietnam

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