The management board of the Bank for Investment and Development of Viet Nam (BIDV) announced its plan to merge with the Mekong Housing Bank (MHB) at a shareholders meeting on April 17.

BIDV Chair Tran Bac Ha at the shareholders' meeting on April 17.

BIDV would issue 336.9 million shares, with a combined value of VND3.369 trillion (US$160.43 million) to complete the merger, with every share of MHB converted into a share of the development bank.

The deal would be implemented with the principle of "maintaining a status quo" to assure that no changes in the business activities of both parties are required.

BIDV Chairman Tran Bac Ha said the merger was part of a Government-adopted plan to restructure the banking system, and it was expected to be completed in late May. The deal was based on spontaneous intentions, as BIDV was aiming for network expansion and MHB at a targeted financial ability enhancement.

"The merger will help us expand networks and customer bases, and intensify capacity in agricultural and rural fields. It will also allow us to enhance our position as a strong financial institution in Viet Nam... with adequate competitiveness to integrate with other banks in the region and the world," the management board's report said.

MHB was among the top 10 banks having the largest networks nationwide, with 44 branches and 185 transaction offices in 35 provinces and cities. Its total asset value is now 110 times as much as that recorded during its establishment in 1997.

"If we only rely on ourselves, it will take seven years to develop a network similar to that of MHB today," said Ha.

The Mekong (Cuu Long) Delta-based MHB had stated earlier this month that the merger was underway, and had shown sustained and healthy development.

Last year, its total assets grew 17.4 per cent year-on-year to about VND45 trillion (US$2.14 billion), and pre-tax profits reached VND162 billion ($7.71 million), reflecting a year-on-year increase of 14 per cent.

Its deposits jumped 14.4 per cent to more than VND37 trillion ($1.76 billion), and outstanding loans expanded by 13.8 per cent to VND30.60 trillion ($1.46 billion) in 2014, with the bad debt ratio pegged at 2.72 per cent at the end of the year.

Chairman Ha told Viet Nam News that BIDV planned to sell a stake of up to 30 per cent to strategic foreign investors in the longer term, and he had shortlisted eight potential partners for negotiations.

The BIDV shareholders meeting had also approved a project to establish a consumer financial company to improve its retail banking operation.

This year, the bank was targeting growth rates of 16.5 per cent for deposits and 16 per cent for lending, and would control its bad debt ratio at less than 2.5 per cent. It also expects to earn VND7.5 trillion ($357.14 million) in gross profits, and pay dividends at 9 per cent.

Last year, its deposits grew 20 per cent year-on-year to VND502 trillion ($23.90 billion) and outstanding loans expanded 19 per cent year-on-year to VND464 trillion ($22.10 billion). Its gross profit was said to be VND6.30 trillion ($300 million), up 19 per cent from the previous year, and the dividend rate was 9.4 per cent.

VNS