The divestment from credit institutions (CIs) and the reduction of the ownership rate of major shareholders at banks are at the ending stage following the roadmap, by the end of 2020 at the latest. Therefore, businesses and banks are urgently selling capital at banks.
Recently, the State Bank of Vietnam (SBV) has continuously requested banks to review large shareholders, who own five percent or more of the chartered capital of other credit institutions, thereby making and implementing divestment plans.
Legally, Circular No. 46/2018/ TT-NHNN regulates the deadline, order and procedures for transfer of major shareholders of a CI and related persons of that shareholder owning five percent or more of the charter capital of another credit institution has officially taken effect from March 1, 2019.
Accordingly, credit institutions coordinate with other credit institutions and major shareholders involved to handle the ownership rate beyond the limit, carry out the plan to withdraw capital at the latest on December 31, 2020. Thus, the remedial plan must have a list of major relevant shareholders, measures and roadmap to handle.
Besides, from the effective date of Circular 46/2018, the major related shareholders are not allowed to increase the number of shares in the leading credit institutions and other credit institutions in any form, except for some cases of receiving bonus or dividends in shares, buying additional shares when the leading credit institutions and other credit institutions increase their charter capital, but must ensure the share ownership percentage after the purchase complies with the limits in the Credit institution Law.
Circular 46/2018 also stipulates that the leading credit institutions and other credit institutions are not allowed to extend credits to the relevant major shareholders after 90 days from the date of the circular coming into effect until the relevant major shareholders comply with the ownership ratio stipulated in Article 55Law on Credit Institutions. For other cases of ownership exceeding limits will be handled according to Circular No. 06/2015/ TT-NHNN.
In the market, MobiFone has just finished divesting from Tien Phong Joint Stock Commercial Bank (TPBank) when reducing the ownership rate from 0.83 percent to zero percent. The third offering price of MobiFone is 21,350 dong per share, lower than the minimum price of the second offering of 25,230 dong per share, as well as the market price of Bank shares (TPB code) at 23,800 dong per share, collecting over 153 billion dong. Currently, TPBank has two big shareholders namely FPT and Doji with the ownership ratio of 9.42 percent and 8.25 percent respectively.
Not only companies, many banks are also urgently planning to divest from other credit institutions. For example, Vietnam Bank for Agriculture and Rural Development (Agribank) announced to prepare to auction over 468,000 OCB shares.
Meanwhile, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) has withdrawn all its equity in Orient Joint Stock Commercial Bank (OCB) after many auctions. Last time, Vietcombank auctioned 1.48 million remaining shares of OCB, starting price of 18,876 dong per share, collecting nearly 27.9 billion dong. In addition to OCB, Vietcombank has withdrawn its capital from Saigon Joint Stock Commercial Bank (SCB) and Cement Finance Company. It is gradually divesting from Vietnam Joint Stock Export Import Bank (Eximbank) and Military Joint Stock Commercial Bank (MB). At the recent 2019 general Meeting of Shareholders, Vietcombank’s leader said that it was no longer a major shareholder of these two banks after reducing ownership in both banks to 4.5 percent of the capital.
With VietinBank, the bank has withdrawn its capital in SCB after transferring over 15.1 million of its shares with the average price of 20,204 dong per share in mid-May. The bank’s net income is nearly 305 billion dong.
Previously, Eximbank reduced its ownership in Saigon Thuong Tin Joint Stock Commercial Bank (Sacombank) from over eight percent to 4.69%.
In fact, the divestment was carried out by banks since the Circular 36/2015/ TT-NHNN took effect (February 1, 2015), but for many reasons that it has lasted for long. After the restructuring period, some weak banks performed well, and the stock market recovered, causing the price of “blue chip” shares to rise. This is an opportunity for businesses and banks to step up divestment in other credit institutions, quickly complying regulations of management agencies.
According to financial analysts, the strong move from SBV in dealing with cross-ownership has made banks unable to hesitate divesting from the system. Because cross-ownership leads to overlapping relationships, it is easy for some bankers to take advantage to pursue personal goals and interests. On the other hand, the condition of divestment at this time is favourable when the macro economy is stable, the stock market flourishes, and banking activities have improved significantly, thereby increasing the attraction for domestic and foreign investors.
Handling cross-ownership has progressed positively, but there are still difficulties. According to TS-LS. Bui Quang Tinfinancial expert, one of the most prominent issues is the revaluation of share value.
On the management side, SBV Governor Le Minh Hung said that SBV had been drastically directing cross-ownership handling. However, as the divestment depends on finding partners, the timing of divestment should be calculated carefully to preserve state capital. According to the scheme of banking system structure to 2020, orientation to 2030, each bank will have to build a roadmap and restructuring plan to finalise cross-ownership status in the system.
Answering questions at the 6th session of the XIV National Assembly on cross-ownership ratio in the banking system, Le Minh Hung said that after six years of restructuring, cross-ownership status in the banking system decreased significantly.
The number of banks with direct cross-ownership decreased from seven pairs to one pair. Direct share ownership between banks and businesses decreased from 56 pairs to two pairs. The percentage of shareholders holding 15 percent or more of the charter capital decreased from 19 banks to one bank.
Even so, cross-ownership was not yet fully handled. Hung said that cross-ownership still existed with cases of deliberately asking others to be named. Recently, the authorities had to make great efforts to discover this case of violation. In fact, cross-bank bank ownership decreased, but it was still in some places due to the complexity of the relationships, and due to the benefits of the coordination group. This posed a great risk to the economy.
Besides, the divestment in enterprises of credit institutions also faced many difficulties due to many reasons. For example, Vietnam Posts and Telecommunications Group (VNPT) failed three times to sell more than 71 million shares of Vietnam Maritime JointStock Commercial Bank (MSB) because no investors registered to participate.
According to the roadmap, banks with the capital ratio exceeding the limit need to complete the divestment in mid-2019. The remaining time is not so much. According to Tran Du Lich, economic and financial expert, the issuance of Circular 46 showed SBV’s determination in dealing with cross-ownership at the system of Vietnamese credit institutions.
The banking sector development strategy until 2025, orientation to 2030, aims to step by step process and eliminate cross-investment, cross-ownership and manipulative and dominant ownership in relevant credit institutions; and set the target of boosting divestment of commercial banks in other credit institutions.
About expectations in 2019, Lich said that the issue of cross-ownership would continue to be positive, because banks must comply with the rules in accordance with international practice, when the time of standard application Basel II was close by.
