In addition to the mergers and acquisitions (M&A) deal between Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) and KEB Hana Bank which is in the process of being completed at a price of 882 million US dollar, the banking sector is promising to have a number of huge M&A deals in the near future when the restructuring process of the sector enters the final stage.
In the second quarter (Q2) of 2019, BIDV finalises all documents with foreign strategic investor. Specifically, BIDV will issue more than 603 million shares for KEB Hana Bank, equivalent to 15 percent of BIDV’s charter capital after the investment. The total value of the deal is more than 20.295 trillion dong (882 million US dollars). After the deal, the state ownership at BIDV will reduce from 95.28 percent to 80 percent of charter capital.
BIDV KEB Hana Bank is considered the largest M&A deal in the financial market in 2019. However, the value of M&A deals in this sector is forecasted to be higher, especially when the sector’s restructuring is in the last stage and banks will have to apply Basel II standards. In particular, the restructuring of weak banks which are under special control will be promoted by the SBV.
In the afternoon of October 14th, Dong A Commercial Joint Stock Bank (DongABank) released a press announcing that the plan to sell shares for supplement charter capital was not approved by the bank’s shareholders. This result will not affect DongABank’s business operation. However, according to Vo Minh Tuan, Chair of the bank’s Board of directors, the bank will submit another restructuring plan to the SBV.
In the market, there is information about the merger of DongABank into a large-scale bank, but its brand name may be retained. DongABank’s shareholders also expect that this can help revive the brand that has been favoured by customers in terms of card services, individual customers, remittance, etc.
However, the acquisition of DongABank requires investors to be financially competent with a real amount of nearly 35 trillion dong (equivalent to 1.5 billion US dollars).
Foreign investors are interested in weak banks.
Dr Tran Du Lich, member of the prime minister’s Economic Advisory Group said that banks’ acceleration of restructuring in the final stage also means weak banks are gradually eliminated from the system, Thus, banking M&A will continue to see new waves with numerous big deals.
The policy of the government and the SBV is to promote the attraction of foreign capital in weak banks’ restructuring, including Construction Bank (CBBank), Ocean Bank, and Global Petrol Bank (GPBank). At the meeting with the prime minister Nguyen Xuan Phuc during the G20 meeting, Nobiru Adachi from J.Trust believed that CBBank will soon be reformed.
Han Chang-woo, Chair cum general director of Maruhan also expressed his desire to receive support from the prime minister, government and Vietnamese authorities in the process of joining the restructuring of banks in Vietnam, particularly OceanBank. The SBV said that it has completed and submitted the prime minister the plan to transfer and restructuring OceanBank after selling to foreign investor.
Foreign investors also negotiated to acquire GPBank. UOB one wanted to buy 100 percent of GPBank’s capital before it was compulsorily purchased by the SBV.
Banking expert Dr Bui Quang Tin said that the compliance with Basel II standards from 2020 will force many small banks to consider M&A, because raising capital to meet Basel II standards is not easy. Therefore, M&A in the banking sector will be more exciting in the near future.
