Vietnam’s banks expect big M&A deals in near future

M&A in banking sector is forecast to be exciting in the near future as many banks are accelerating to restructure and raise capital to meet Basel II standards’ deadline by 2020 set by the central bank, experts said.

Vietnam’s banks expect big M&A deals in near future

Vietcombank will continually sell another 6.5 percent stake from now until 2020.

Merger and acquisition (M&A) in the domestic banking industry is expected to heat up in the near future with total value of deals estimated at some US$2 billion in 2019.

According to analysts from Bao Viet Securities Company, besides the deal of Bank for Investment and Development of Vietnam (BIDV) with the Republic of Korea (RoK)’s KEB Hana Bank announced recently, the banking sector is also expected to see some other possible deals between local banks and foreign investors this year, such as the sales of Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank)’s 6.5 percent stake and Military Bank’s 7.5 percent stake.

After the acquisition of 6.5 per cent stake to Singapore’s GIC Private Limited and Japan’s Mizuho Bank Ltd at a value of VND6.2 trillion (US$266 million) early this year, Vietcombank is continually promoting a plan to sell another 6.5 percent stake from now until 2020.

Meanwhile, many investors are looking for opportunities to pour capital into Vietcombank. In particular, GIC, after buying 2.55 percent of Vietcombank’s stake, still expects to join the upcoming share offering of the state-own bank.

In addition, the merger of Petrolimex Group Commercial Joint Stock Bank (PGBank) and Ho Chi Minh City Development Commercial Joint Stock Bank (HDBank), with a share conversion rate of 1:0.62, is also expected to be completed by the end of this year.

As for state-run Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), which manages Ocean Commercial One Member Limited Liability Bank (OceanBank), its chairman Le Duc Tho said that OceanBank is also in the final stage of completing procedures to cooperate with foreign partners.

Meanwhile, Global Petro Commercial Join Stock Bank (GPBank) is currently strengthening its performance and some foreign investors are also interested in a long-term cooperation with the bank.

Favorable conditions

M&A in banking sector is forecast to be exciting in the near future as many banks are accelerating to restructure and raise capital to meet Basel II standards’ deadline by 2020 set by the central bank, experts said.

 

Tran Thi Bao Ngoc, head of Securities Investment Banking Division of Vietnam Prosperity Commercial Joint Stock Bank (VPBS) said that the M&A market in the banking and finance sector still has a lot of room for foreign investors. In the second half of this year as well as in the near future, the banking and finance will be still an attractive sector to foreign investors.

Ngoc attributed the attractiveness to the improved business performance of domestic banks in recent years though some restrictions still exist in the banking sector, such as the regulations on controlling foreign investors to participate in transactions.

Vo Tri Thanh member of the Advisory Council for National Financial and Monetary Policies believed that the M&A market of Vietnam’s banking sector will be attractive as local banks need to raise capital to meet Basel II standards.

Besides, the Vietnamese central bank is promoting plans to restructure banks, especially the poorly performing ones. It includes a policy to encourage foreign investors in general and foreign financial institutions in particular to acquire or merge with Vietnamese weak commercial banks.

The government has also been stepping up this plan through promoting meetings and discussions with international financial institutions.

However, experts said to speed up the progress of local banking M&A, it is necessary to revise current regulations on valuation and share selling price.

As state-owned banks are not allowed to sell shares lower than market price, banks will find it difficult to offload the stake, especially when the share price accelerates in the stock markets, Bui Quang Tin, CEO of Bizlight Business School, said. Hanoitimes

Linh Pham

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