VietNamNet Bridge - Small banks merging with big banks to form stronger institutions is a growing trend in Vietnam.

The State Bank, for example, has given the nod to the Sacombank-Southern Bank merger plan. This is described as a “morganatic” marriage. Sacombank is one of the largest Vietnamese banks with a strong brand, powerful financial capability and good prestige, while Southern Bank, in its financial reports, shows problems related to bad debts and profits.

However, Sacombank’s chair Pham Huu Phu said he doesn’t think this is a bad deal for Sacombank, though it will have to carry a weaker bank on its back, affirming that the involved parties would close the deal if they believe in a brighter future for both.

The Mekong Development Bank (MDB) – Maritime Bank merger plan, submitted to the State Bank in 2014, got approval from the watchdog agency in April. Under the plan, MDB’s shareholders would convert their shares into Maritime Bank’s shares at the ratio of 1:1, while Maritime Bank would issue an additional 375 million shares, which is equal to the number of MDB’s existing shares.

Vietcombank will admit Saigon Bank in accordance with a State Bank’s decision. Governor of the State Bank Nguyen Van Binh said though Vietcombank’s finance indexes are healthy, it still needs to reform itself by admitting another bank to become the Number 1 bank in the future.

Saigon Bank, the partner introduced for Vietcombank, has charter capital of VND3.080 trillion, one of the smallest banks of the system. The bank made a modest profit VND163 billion by September 2014. Meanwhile, Vietcombank reported a huge profit of VND5.68 trillion last year.

Sources said that BIDV is considering admitting Mekong Housing Bank (MHB) to form a financial institution with charter capital of VND31.5 trillion.

If the deal succeeds, the new bank would be the third largest bank in the system, after Agribank with VND729.5 trillion and VietinBank VND661.1 trillion.

VietinBank and PG Bank seem to have to overcome a lot of difficulties before they can reach a deal.

At first, PG Bank wanted to become a subsidiary of VietinBank and maintain its brand. However, the “bank-in-bank” model as called by PG Bank did not accord with the Law on Credit Institutions.

On April 14, 2015, the VietinBank-PG Bank merger plan was put into discussion at both banks’ shareholders’ meetings.

What attracts VietinBank to the merger deal is the large distribution network of 6.600 filling stations controlled by Petrolimex (Vietnam Petroleum Import/Export Corporation), the founder of PG Bank.

After the merger, VietinBank’s total assets would increase by VND25 trillion and the charter capital would be VND40 trillion.

Kim Chi