Petrolimex Group Commercial Joint Stock Bank (PGBank) has announced the draft document of the 2019 Annual general Meeting (AGM) expected to be held on April 25th in Hanoi.
In the document, along with the information on the bank’s financial situation in 2018 and the business plan in 2019, PGBank also revealed the merger process with HCM City Development Commercial Joint Stock Bank (HDBank) which was approved nearly a year ago by shareholders.
Specifically, report of PGBank’s Board of directors (BOD) mentioned that in 2018, the total mobilisation fund of the bank reached 25.745 trillion dong, in which customer deposits accounted for more than 90%, equivalent to 23.345 trillion dong. Customer lending index only increased by three percent over the previous year, reaching 22.052 trillion dong.
In 2018, the bank’s total income before operating and provisioning expenses reached more than 1.197 trillion dong, up by 17.6 percent and exceeded the plan.
However, the bank’s BOD emphasized that the time-consuming merger has many negative impacts on PGBank’s operation. Accordingly, the bank’s total assets, capital mobilisation and lending all grew at low level and did not meet the plan.
“Despite the high profit growth, it did not meet the plan due to the high provisioning”, said the bank’s BOD.
According to PGBank, restructuring has been the bank’s top priority for many years. After shareholders approved the plan to merge with HDBank last year, PGBank has completed this merger plan but the process is still incomplete.
The bank’s BOD said that both PGBank and HDBank are preparing for the handover, but the time of completion is left open by the bank leaders. Even, PGBank’s BOD has even submitted shareholders the 2019 business targets and plans as usual. It means that the merger cannot be completed in 2019.
The 2019 AGM document of HDBank also did not mention the progress of the merger between the two banks. This further confirms the difficulty to finish the merger this year.
Previously, at the 2018 AGM, leaders of HDBank and PGBank suddenly announced that the two banks will merge together (while PGBank was previously expected to merge into Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) and the two parties had signed the merger documents and comprehensive cooperation agreement).
The merger plan of HDBank and PGBank has even been approved by shareholders of the two banks. The expected swap rate is one PGBank share for 0.621 HDBank share. The biggest shareholder of PGBank is Vietnam National Petroleum Group (Petrolimex) which holds 40 percent of the bank’s stake, equivalent to 120 million shares.
After the merger, HDBank’s charter capital will be 15.345 trillion dong, owning nearly 370 branches and transaction offices.
The merger plan between the two banks has also been approved by the State Bank of Vietnam (SBV). Under the initial plan, the handover and merger would be completed in August 2018. However, since then, all information about the merger has not been mentioned by both the two banks and they are now still operating independently.
How is PGBank doing?
As emphasized by PGBank’s BOD about the negative impacts of the long-lasting merger on the bank’s operation. In addition to the failure to complete the targets of total assets, mobilisation and lending, the bad debt settlement of PGBank in 2018 also faced many difficulties. The main reason is the unfavourable asset transfer and trading market, and the complicated and prolonged procedures to carry out this activity.
Accordingly, the total bad debts (group three to five) of the bank by the end of 2018 were 675 billion dong, down by only 2.3 percent compared to 2017. The on-balance sheet bad debt ratio of the bank also declined by only 0.16 percent and still accounted for 3.06 percent of the total outstanding loans.
PGBank’s sale of debts to VAMC only fulfilled 10 percent of the plan with just 67 billion dong of debts sold.
The bank’s interbank capital business even fell because other banks reduced their trading after PGBank was approved to merge into HDBank.
As a result, in 2018, PGBank recorded 1.197 trillion dong in total income, exceeding 128 percent of the plan. Nevertheless, the bank had to spend 1.039 trillion dong on operating expenses and credit risk provisions, making the pre-tax profit to remain only 159 billion dong, equivalent to 87 percent of the year plan.
Under the plan, PGBank aimed to bring the ratio of bad debts on total outstanding loans down to 1.5 percent in 2018, but this result was finally still above three percent.
In 2019, as still being influenced by the merger process, PGBank still sets fairly cautious growth targets with total assets reaching 32.736 trillion dong, up by nine percent; mobilisation growth of 11 percent and outstanding loan growth of eight percent, reaching respectively 28.547 trillion dong and 23.892 trillion dong.
The total operating income of the bank is expected to decline by 13 percent to 1.037 trillion dong. However, with the expectation of cutting expenses and provisions for risks by 21%, PGBank aims to grow its pre-tax profit by 33 percent to 211 billion dong this year.
