During the merger and acquisition (M&A) process of Vietnamese banks following the restructuring scheme of banking system since 2011 after the first merger of three joint stock commercial banks including Saigon Commercial Bank (SCB), Vietnam Tin Nghia Bank (TinNghiaBank) and FCB into SCB, it is until now that there is another 3:1 M&A deal among Hochiminh City Development Bank (HDBank), Dai A Joint Stock Commercial Bank (DaiABank) in 2013 and Petrolimex Joint Stock Commercial Bank (PGBank).
Compared to SCB’s “3:1″ merger in which three banks shared the same owner, HDBank’s “3:1″ merger sees three different owners.
Following the merger scheme of PGBank into HDBank, after shareholders of these two banks officially approved the merger at the annual general meeting (AGM) in 2018 on April 21, the two sides will sign merger documents on April 23.
In April 2018, HDBank will complete the documents on approval of principles for the State Bank’s approval.
In May 2018, it is expected that the State Bank will approve in principle and submit documents to offer shares for sale to the public to the State Securities Commission (SSC).
In June 2018, it is expected that SSC will approve the offering and the State Bank Governor will make approval decisions.
In July 2018, HDBank and PGBank will finalise the list of shareholders to distribute and swap shares.
In August 2018, the two banks will complete the merger.
PGBank will merge into HDBank by transferring its entire assets, rights, obligations and legal interests to HDBank while terminating the existence of PGBank.
At HDBank’s AGM, on April 21, the bank’s representative said the share swap ratio between PBBank and HDBank will be 1:0.621, or one PGBank’s share for 0.621 HDBank’s share. The share swap time is expected to be in July 2018.
Regarding senior personnel after merger, HDBank still maintains members of the board of directors, management board and control board.
For members of the board of directors, PGBank’s management board, control board will self-dismiss after merger. After merging, based on experience, capability and demand of members, the post-merger bank will consider allocating suitable positions and jobs.
Regarding labourers, the post-merger bank will inherit all rights and obligations of PGBank for valid labour contracts signed between PGBank and labourers before the merger.
After merger, in 2018, it is expected that HDBank’s chartered capital will be 12.809 trillion dong (of which, the bank’s chartered capital as of December 31, 2017 was 9.809 trillion dong, and PGBank’s chartered capital will be three trillion dong).
The bank’s total assets after the merger are expected to hit 267.256 trillion dong and the equity is expected to reach 17.762 trillion dong.
The pre-tax profit is 3.887 trillion dong. The consolidated Capital Adequacy Ratio (CAR) is 12.3 percent. It is expected that the dividend pay-out ratio to shareholders will be 12 percent.
The number of employees of the post-merger bank (excluding subsidiaries) is 5,264 people.
The operation network includes 376 units including one major headquarter in HCM City and one representative office in Myanmar.
*Comparing between HDBank and PGBank’
As of December 31, 2017, HDBank’s total assets were nearly 6.5 times larger than those of PGBank.
The mobilised capital was 5.7 times, the outstanding loans were four times, the chartered capital was 3.2 times and the profit was 30 times higher than PGBank.
Regarding operation safety indexes, HDBank’s position was better than PGBank.
Though PGBank’s CAR is 14.89 percent, higher than that of HDBank at 12.5 percent, this ratio shows that the bank’s capital exploitation is not effective which will affect its profitability.
One more thing, PGBank also lent nearly all of the mobilised capital. This proportion amounted to 93.36 percent of 2017, while that in HDBank was 80.2 percent. Both banks have exceeded the lending proportion prescribed by the State Bank at 80 percent. However, HDBank will adjust after merger.
*Where is HDBank among Vietnamese banking system?
HDBank’s growth in three recent years has helped this bank grow day-by-day. Especially, after merging DaiABank in 2013 and acquiring Viet-Societe generale Co., Ltd (SGVF), HDBank’s chartered capital was 8.1 trillion dong, its total assets amounted to more than 85 trillion dong, and its operation network covered more than 210 transaction points nationwide.
As of the end of 2015, HDBank’s chartered capital was still 8.1 trillion dong; its total assets increased 106.486 trillion dong, up 25 percent after two years of merging with DaiABank.
Regarding operation indexes, in 2016, the equity index was almost unchanged from 2015, standing at 9.943 trillion dong. Other indexes increased about 40 percent from 2015. Specifically, the total assets rose 41 percent, the capital mobilisation was 39 percent, the oustanding loans were 37 percent, and the pre-tax profit was 46 percent.
In 2017, after HDBank raised its chartered capital from 8.1 trillion dong to 9.810 trillion dong, the equity also swelled 48 percent, reaching 14.759 trillion dong. The pre-tax profit improved 1.1 times in 2016, hitting 2.417 trillion dong.
*CAR has improved over the past three years
HDBank has strengthened the lending, causing loan to total deposit ratio to rise from 68.6 percent in 2015 to 80.2 percent in 2017. This also helped the Return on Equity (ROE) to swell and increase strongly from 6.6 percent in 2015 to 15.8 percent in 2017. The Return on Asset (ROA) also inched up from 0.6 percent in 2015 to 1.2 percent in 207.
As such, with operation indexes as of the end of 2017, HDBank ranked 11th in Vietnam banking market in terms of total assets and 8th in consolidated pre-tax profit, following statistics on total assets of joint stock commercial banks based on consolidated financial reports of banks in 2017.
*After merging with PGBank, HDBank becomes one among Top 10 banks
After merging with PGBank, HDBank will move to become one of Vietnam’s Top 10 banks.
From the 2017 milestone, growth indicators in HDBank’s after-merger operations will grow rapidly.
If in 2017, HDBank’s total assets were 189.334 trillion dong, accounting for two percent among 10,000 trillion dong total assets of the banking sector, equal to nearly 1/5 compared to the total assets of four giants (BIDV, Agribank, Vietcombank, and Vietinbank) with 1,000 trillion dong each.
After merger, HDBank’s total assets will increase 41 percent, reaching 267.256 trillion dong, and by 2020, the total assets will increase 1.28 times from 2017, touching 432.245 trillion dong.
The equity in 2017 was 14.759 trillion dong compared to 17.762 trillion dong after merger. It is expected to touch 28.842 trillion dong by 2020, nearly doubling from 2017.
The pre-tax profit in 2017 was 2.417 trillion dong compared to 3.887 trillion dong after merger. In 2020, it is expected to reach 7.139 trillion dong, up 1.95 times from 2017.
As such, regarding the asset scale after merger, HDBank will be among the Top 10.
HDBank has not mentioned the growth of chartered capital after merger, which is still nearly 12.810 trillion dong, and is among the banks having the chartered capital of more than 10 trillion dong.
However, it is still small compared to the four giants with the chartered capital of 30 trillion 38 trillion dong and will continue increasing.
In addition, the banking system as of the end of 2017 still had 10 banks with the chartered capital of less than five trillion dong.
HDBank’s CAR in the upcoming years after merger shall follow the regulation of the State Bank with the CAR at more than 12 percent, and Loan to Deposit ratio at 80 percent.
The dividend payment promise at 12 percent in three years after merger, if being realised, will be beneficial to PGBank’s shareholders and disadvantageous to HDBank shareholders when in 2017, they were paid at 35 percent. The comforting thing is that bank shareholders after merger will be shareholders of a bank in Top 10.
