VietNamNet Bridge - Why has the Kido Group jumped into the banking sector? And why has it chosen the troubled Dong A Bank?

 

Dong A Bank was once the bright star that caught the eye of Citibank.

Opinions from well informed circles said Dong A has agreed to sell its shares to Kido, which was initially a sweets manufacturer and has recently decided to become a food company. 

Dong A Bank’s shares are traded at the low price of VND6,000 per share. Sources said that Kido decided to spend VND1 trillion to buy the bank’s shares at the high price of VND10,000 per share.

The information has stirred up the investor community which cannot understand why Kido wants to jump into the banking sector, and why it chose Dong A Bank.

Dong A’s total assets have reportedly increased by 34 percent since 2011, but its profits have decreased, while it took a loss in the fourth quarter of 2014. 

The bank’s finance report showed it incurred a loss of VND122 billion in the quarter, which led to a sharp fall of 92 percent of the bank’s post-tax profit in 2014 to VND27 billion.

One of Dong A’s biggest problems is bad debt. The bank reported that the non-performing ratio had reached 3.76 percent by the end of 2014, or VND1.947 trillion. However, if counting the VND3.921 trillion worth of debts it had sold to the Vietnam Asset Management Company (VAMC), the ratio would be 11 percent.

An analyst said that Dong A now needs capital to settle the problems it is facing.

Dong A, at the 2014 shareholders’ meeting, discussed two measures to increase chartered capital, either through stock issuance or through merger & acquisition (M&A). 

In early 2015, sources said that Dong A and An Binh Bank would be part of the M&A deal.

Cao Sy Kiem, who was then chair of Dong A and has resigned from the post, said that the two sides were still thinking about the deal.

While the M&A deal between Dong A and An Binh Bank is still an unknown, Dong A has announced Kido’s investment of VND1 trillion into the bank.

The analyst said Kido has enough money now because it has sold the sweets production unit to a foreign manufacturer, but it may lack money in the future when it will will make larger investments in the food manufacturing sector. 

Thus, Kido has now decided to become a shareholder of a bank. This gives it advantages in accessing bank loans.

NCDT