The shortest way to expand scale and ecosystem is purchases, mergers and acquisitions (M&A).
According to financial experts, currently, domestic banks actively prepared for M&A activities. In addition, foreign investment funds were also studying the situation of Vietnamese banks, especially in banks with potential for development, healthy governance and transparent financial systems as well as weak banks.
Le Xuan Nghia, finance and banking expert, said that M&A was considered a quick solution for banks to increase the scale and capital in terms of equity, meet the new capital adequacy ratios according to Basel II standards which would take effect from 2020. With the pressure to improve safety ratios according to new standards, small banks were forced to raise capital quickly, but that was not easy. Therefore, the need to merge into big banks was inevitable, especially when the policy of the management agency was to reduce the number and increase the quality of domestic banks.
Due to the unsuccessful pressure to improve financial capacity over the years and the chartered capital was only 3 trillion dong, Saigon Bank for Industry and Trade (Saigonbank) considered merging and was approved by a major partner, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank).
In the merger of Petrolimex Group Commercial Joint Stock Bank (PGBank), Nguyen Huu Dang, Chief Executive Officer of HCM City Development Joint Stock Commercial Bank (HDBank), said that the general Meeting last year approved the M&A project. The project was submitted to the State Bank of Vietnam (SBV) and by October 2018 it was approved the principle of merger.
HDBank has now appointed representatives to participate in the Board of directors of PGBank to accelerate the merger process.
After completing the merger of PGBank, HDBank will continue to expand the ecosystem with the provision of banking services for some key partners, namely Vietjet, Petrolimex, Vinamilk, Coop-mart, etc.
In 2018, HDBank’s operating expenses only increased by 13.4 percent while total operating income increased by 28.4 percent.
Hochiminh City Securities Corporation (HSC) forecast that HDBank’s profit in 2019 would grow by 27.3 percent and reach 5.098 trillion dong. Net interest margin (NIM) increased by 0.43 percent to 4.47 percent mainly due to HDBank’s NIM rate increased by 0.3 percent. NIM at HD Saison would remain at 27 percent in 2019. Net interest income would grow by 20.9 percent to 9.243 trillion dong. In which, HDBank’s net interest income increased by 21.7 percent and HD Saison increased by 19.7 percent.
Although these assumptions did not take into account M&A deal with PGBank, HSC maintained a positive view on that deal. HSC believed that the exclusive cooperation with Petrolimex for 10 years would help HDBank complete the multidisciplinary retail strategy to bring higher efficiency.
