Merger and acquisition (M&A) is considered as a shortcut to expand operation scale if banks want to seize opportunities from the resonance. However, besides gains, there are losses.
Thanks to the network integration of three financial institutions including HDBank, DaiABank and SGVF, as of the end of Q1/2018, HDBank had 285 bank branches and 13,000 transaction points nationwide, and the chartered capital of more than nine trillion dong.
Le Thanh Trung, deputy general director of HDBank said M&A is considered as an important strategy for the bank to enlarge scale, expand network system and customer databases.
That is also the reason for HDBank to continue accelerating M&A strategy.
According to the assessment of VNDirect Securities JSC, the merger with PGBank will bring about long-term benefits to HDBank. After the merger, HDBank’s network will increase from 240 to 265 branches/transaction offices and HDBank becomes the second largest bank among private ones.
Along with that, PGBank is providing monetary management service, cash collection service for Petrolimex and more than 2,100 petro stations nationwide.
As of the end of 2017, the proportion of Current Account/Savings Account (CASA) of PGBank was 24.3 percent compared to just 12.9 percent of HDBank. The merger may help improve HDBank’s CASA from 12.9 percent to 14.7 percent, thereby reducing HDBank’s capital mobilisation cost.
Officially merging MHB in mid-2015, BIDV changed the entire brand identification of the head office, 44 branches, and 187 transaction offices of MHB nationwide following its identification within just a few days.
After the merger, BIDV’s total assets reached 700 trillion dong, ranking the fourth in the domestic commercial bank system in terms of asset scale. The bank’s chartered capital increased to more than 34 trillion dong. The distribution network expanded to nearly 1,000 points nationwide with a total of nearly 24,000 employees.
Similarly, the number of branches and transaction offices of Maritime Bank also increased from 221 to nearly 300 units, bringing the bank to the Top 5 in terms of network, Top 3 in chartered capital in the group of joint stock commercial banks after completing the merger deal with Mekong Bank in 2015. With this M&A deal, Maritime Bank’s equity rose 44 percent compared to the time before the merger, touching 13.621 trillion dong.
Chair of a bank admitted M&A is the opportunity and the shortcut to expand bank operation scale if the resonance is integrated well. However, bank M&A over the last period was mainly because the sector had to experience the restructuring period and in fact, no M&A deal was completely voluntary and many deals failed.
The reality shows that after M&A, banks have to struggle to handle the “huge” bad debts left by the merged unit. BIDV, Sacombank, Maritime Bank, PVcomBank, etc. took a lot of time and efforts but still could not handle thoroughly the bad debt from the merger with MHB, SouthernBank, MekongBank, Western Bank, etc.
Financial expert Le Xuan Nghia said in many M&A deals, large banks had to “embrace” small ones. They just did as assigned, but they do not want to “embrace” small and ailing banks. After merging, they have to settle a large amount of bad debt from small banks, pulling profits down due to having to put for risk provisions.
For example, at BIDV, at the end of 2015, after the merger with MHB, with the bad debt at nearly 9.6 trillion dong, the bank has the highest amount of bad debt in the system at that time. As of the end of Q1/2018, bad debt at BIDV accounted for 1.62 percent of the total oustanding loans but the total absolute bad debt touched more than 14.2 trillion dong.
The pre-provisioning profit in the first quarter of 2018 increased 85 percent from the same period last year, but the risk provisioning burden was so large (i.e. six trillion dong) that the after-tax profit only increased slightly, touching about two trillion dong.
