An inevitable trend
In 2016, Vietnam's banking sector continues to face many challenges, a large backlog of bad debts in the system, needed several years to resolve. First, the bank has continued to sell bad loans to asset management company of the Credit Institutions (VAMC), but the solution to handle bad loans is still slow. Secondly, banks are moving toward Basel II norms applied the first tranche. Expectedly, from February 2017 higher requirements would occur to require current capital adequacy ratio and M&A would become an inevitable trend.
In the period 2011 - 2015, M&A in banks was quite lively, mainly as part of the restructuring required by the State Bank of Vietnam (SBV) to ensure the safety of the system of credit institutions use (CI), the currency market stability. Number of banks has decreased by 19 organizations through the implementation of M&A, dissolved or revoked license. Among them, there were 9 banks, 2 non-bank credit institutes and 8 foreign bank branches.
Mr. Bui Huy Tho, Director of Management Department of Credit and Banking Activities, Inspection and Supervision Agency said the SBV according to the scheme of restructuring the system of credit associated with effective treatment of bad debts, by the year 2020, Vietnam's banking system must have at least 1-2 banks have the scale and level corresponding to the banks in the region in order to gradually meet the requirements of international economic integration. Therefore, based on the review of implementing the restructuring scheme banks results in the period 2011 - 2015, SBV was urgently implement drastic measures to restructure banks, resolute weak institutions; paying special attention to research and propose measures for managing and monitoring mechanisms to support the restructuring of commercial banks to be acquired.
According to Bui Huy Tho, M&A is a common effective solution to handle the weak credit, having many advantages compared to other measures. Especially with the support and intervention from SBV to ensure the process of M&A not disrupt the operation of credit institutions and preserve the rights and interests of shareholders, customers, save costs, time and man power.
Now, 12 banks had chartered capital below VND 4,000 billion, this is a modest amount of charter capital in the context of fierce competition that needed much capital to boost the lending and financial activities trade as well as to invest in infrastructure, information technology systems, service, etc. and several financial institutions were facing many problems in the operation. Therefore, in the coming period would be the stage for these banks having opportunity to restructure, find adequate partners to conduct M&A, avoid being eliminated.
Expectations of foreign capital
Recently, financial markets witnessed the share business of banks to foreign investors, the latest one, Vietcombank sold 7.73% of charter capital to GIC Special Investments, the Singapore sovereign wealth fund chaired by Prime Minister Lee Hsien Loong. After the deal, Vietcombank became the focus of the banking sector, contributed to the “galloping” increasing of bank share.
The International Finance Corporation (IFC), a member of World Bank Group officially announced to become shareholders of TienPhong Bank (TP Bank) nearly half month ago (dated August 26). IFC's investment package worth at TP Bank VND 403.1 billion (approximately USD 18.3 million) in the form of preferred stock purchase, allows IFC to hold 4.99% share in TP Bank. Not only TP Bank, IFC is also the investors to pour capital into ABBank with 10% share and in VietinBank with 8.03% share.
Also at Eximbank, the largest shareholder is Sumitomo Mitsui Banking Corporation - SMBC (Japan) with 185, 329, 207 shares, representing 15% ownership rate. The SMBC capital contribution represented by Mr. Naoki Nishizaw - Vice Chairman of the Board.
It can be seen that the exchange and purchase business of banking shares among foreign partners were very bustle recently. From now until the wave of M&A blooming in the financial market, the acquisition of domestic shares will be more pushed up by foreign banks. As compared to the procedure for establishing a 100% foreign capital subsidiary bank, the acquisition of domestic shares is made easier.
Driven by the Government, banks are in the process of restructure, if a bank wants the percentage of shares to foreign investors (investors) exceeded the permitted level, the bank will be considered to enhance financial potential and accelerate the process of restructuring. So, not only to attract foreign capital in the recent capital increase, a Bank CEO said that his bank planned to submit the SBV for funding from foreign investors, with the rate on over 50 %, but still waiting for opinions of the Government and the SBV. It is also seen as an effective solution to help the restructuring process of this sector in the right direction and effectiveness.
According to representatives of banks, an important factor in foreign capital call is still find suitable investors and boost the development strategy in the future, then consider the price factor. In fact, the price traded between ordinary investors and strategic investors is also very different by involving bank control. As for foreign investors, the financial - banking of Vietnam is an attractive area, but they will not invest with any price and to determine funding especially for small, weak, poor and are in the process of restructure, they also consider very carefully.
Dr. Cao Sy Kiem – the former Governor of SBV commented, last time, the banking sector has gone through a "surgery" and many banks faced with a wave of M&A. However, besides the bank has successfully attracted foreign capital, many banks also failed to negotiate foreign capital call to avoid M&A or being acquired for VND 0. "The most important thing for domestic banks now is to gradually strengthen, promote restructuring, expanding activity and stabilizing apparatus, in order to attract suitable strategic investors. Thus, the bank's position also changed "- Dr. Cao Sy Kiem said.
In 2016, Vietnam's banking sector continues to face many challenges, a large backlog of bad debts in the system, needed several years to resolve. First, the bank has continued to sell bad loans to asset management company of the Credit Institutions (VAMC), but the solution to handle bad loans is still slow. Secondly, banks are moving toward Basel II norms applied the first tranche. Expectedly, from February 2017 higher requirements would occur to require current capital adequacy ratio and M&A would become an inevitable trend.
In the period 2011 - 2015, M&A in banks was quite lively, mainly as part of the restructuring required by the State Bank of Vietnam (SBV) to ensure the safety of the system of credit institutions use (CI), the currency market stability. Number of banks has decreased by 19 organizations through the implementation of M&A, dissolved or revoked license. Among them, there were 9 banks, 2 non-bank credit institutes and 8 foreign bank branches.
Photo for illustration
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According to Bui Huy Tho, M&A is a common effective solution to handle the weak credit, having many advantages compared to other measures. Especially with the support and intervention from SBV to ensure the process of M&A not disrupt the operation of credit institutions and preserve the rights and interests of shareholders, customers, save costs, time and man power.
Now, 12 banks had chartered capital below VND 4,000 billion, this is a modest amount of charter capital in the context of fierce competition that needed much capital to boost the lending and financial activities trade as well as to invest in infrastructure, information technology systems, service, etc. and several financial institutions were facing many problems in the operation. Therefore, in the coming period would be the stage for these banks having opportunity to restructure, find adequate partners to conduct M&A, avoid being eliminated.
Expectations of foreign capital
Recently, financial markets witnessed the share business of banks to foreign investors, the latest one, Vietcombank sold 7.73% of charter capital to GIC Special Investments, the Singapore sovereign wealth fund chaired by Prime Minister Lee Hsien Loong. After the deal, Vietcombank became the focus of the banking sector, contributed to the “galloping” increasing of bank share.
The International Finance Corporation (IFC), a member of World Bank Group officially announced to become shareholders of TienPhong Bank (TP Bank) nearly half month ago (dated August 26). IFC's investment package worth at TP Bank VND 403.1 billion (approximately USD 18.3 million) in the form of preferred stock purchase, allows IFC to hold 4.99% share in TP Bank. Not only TP Bank, IFC is also the investors to pour capital into ABBank with 10% share and in VietinBank with 8.03% share.
Also at Eximbank, the largest shareholder is Sumitomo Mitsui Banking Corporation - SMBC (Japan) with 185, 329, 207 shares, representing 15% ownership rate. The SMBC capital contribution represented by Mr. Naoki Nishizaw - Vice Chairman of the Board.
It can be seen that the exchange and purchase business of banking shares among foreign partners were very bustle recently. From now until the wave of M&A blooming in the financial market, the acquisition of domestic shares will be more pushed up by foreign banks. As compared to the procedure for establishing a 100% foreign capital subsidiary bank, the acquisition of domestic shares is made easier.
Driven by the Government, banks are in the process of restructure, if a bank wants the percentage of shares to foreign investors (investors) exceeded the permitted level, the bank will be considered to enhance financial potential and accelerate the process of restructuring. So, not only to attract foreign capital in the recent capital increase, a Bank CEO said that his bank planned to submit the SBV for funding from foreign investors, with the rate on over 50 %, but still waiting for opinions of the Government and the SBV. It is also seen as an effective solution to help the restructuring process of this sector in the right direction and effectiveness.
According to representatives of banks, an important factor in foreign capital call is still find suitable investors and boost the development strategy in the future, then consider the price factor. In fact, the price traded between ordinary investors and strategic investors is also very different by involving bank control. As for foreign investors, the financial - banking of Vietnam is an attractive area, but they will not invest with any price and to determine funding especially for small, weak, poor and are in the process of restructure, they also consider very carefully.
Dr. Cao Sy Kiem – the former Governor of SBV commented, last time, the banking sector has gone through a "surgery" and many banks faced with a wave of M&A. However, besides the bank has successfully attracted foreign capital, many banks also failed to negotiate foreign capital call to avoid M&A or being acquired for VND 0. "The most important thing for domestic banks now is to gradually strengthen, promote restructuring, expanding activity and stabilizing apparatus, in order to attract suitable strategic investors. Thus, the bank's position also changed "- Dr. Cao Sy Kiem said.
