Mergers and acquisitions (M&A) activities in the banking sector have been quiet for more than three years, but many experts believed that banking M&A would be very exciting in the near future.
In fact, over the past three years, there had been no really big M&A deal in Vietnam’s banking industry. In some cases, it was just a strategic adjustment of foreign banks, which led to deals between foreign banks, as in the case of Shinhan Bank Vietnam Ltd (Shinhan Bank) buying retail segment of ANZ Vietnam.
According to Le Xuan Nghia, finance and banking expert, the main reason for the quiet M&A market was the absence of domestic investors with financial potential. According to the Circular No.39/2016/TT-NHNN of the State Bank of Vietnam (SBV), commercial banks were not allowed to borrow money to buy shares of other banks like the previous period.
On the other hand, Circular No.46/2018/TT-NHNN regulated the time limit and procedures for transition for major shareholders of a credit institution and its related persons owning shares from five percent or more of the charter capital of another credit institution. The circular would take effect from 2021.
Circular 46 required credit institutions to coordinate with major shareholders to review and determine the list of major shareholders and related persons of such shareholders owning shares of 5 percent or more of the charter capital of an other credit institutions; the focal credit institutions needed to coordinate with other credit institutions, major shareholder groups to make a plan to handle the ownership of shares beyond the limit, to carry out the corrective plan to ensure the latest on December 31, 2020. Share ownership ratio of related major shareholders complied with the amended and supplemented Law on Credit Institutions. It was the strong handling to eliminate cross-ownership that made M&A quiet.
Meanwhile, foreign investors who wanted to own shares in Vietnamese banks did not have many opportunities. The reason was that foreign room in Vietnamese banks such as Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), Asia Commercial Joint Stock Bank (ACB) was exhausted. For small and medium banks, the attraction of foreign capital was not easy. With weak banks, forced resale (Construction Commercial One Member Limited Liability Bank (Construction Bank CBBank), Ocean Commercial One Member Limited Liability Bank (OceanBank), Global Petro Sole Member Limited Commercial Bank (GPBank)), there were some foreign investors looking at it, but the negotiations could not be done overnight.
Tran Du Lich, economic and financial expert, said that the banking industry restructuring had entered phase II. Although there were many difficulties in the early stage of restructuring process, the banking system avoided the breakdown, the liquidity and operational risks of banks improved. That might also be part of the reason that M&A banks had been quiet over time.
According to Dr Tran Du Lich, for banking regulations of countries around the world, depending on the size of each bank, they were allowed to perform their operations in accordance with their capabilities. But in Vietnam, banks were allowed to perform the same operations, while the scales and capacities were not the same. For weak banks, it was necessary to seek M&A solution to increase the resonance power and meet the standards according to international practices.
Up to this point, most banks that had M&A plans had greater potential than before. In addition, foreign investors’ interest in holding shares of domestic banks was also an opportunity for these banks to issue more shares and raise capital. Therefore, domestic banks and foreign shareholders were actively negotiating for results.
Nguyen Huu Dang, Chief Executive Officer of HCM City Development Joint Stock Commercial Bank (HDBank), said that by the end of 2019, Petrolimex Group Commercial Joint Stock Bank (PGBank) would be merged into HDBank. The merger plan was approved by shareholders from the general Meeting of Shareholders last year, but had not been completed yet.
According to Dang, the merger scheme was approved by SBV in principle. The two banks completed documents and were preparing to ensure good and effective operation before the merger. In order to facilitate the process of merging and handling outstanding issues at PGBank, HDBank sent personnel to participate in PGBank’s executive management.
Nguyen Thi Phuong Thao, vice Chair of HDBank’s Board of directors, said that the completion of merging PGBank into HDBank would help expand the bank’s customer network and ecosystem. Previously, HDBank had a strategic cooperation agreement with Petrolimex Group to exploit the advantages of both parties.
Another reason that made M&A more exciting, with credit institutions that were in need of restructuring, was the introduction of Resolution 42/2017/QH14 on piloting the handling of bad debts and handling security assets of bad debts in credit institutions.
