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SBV gives in principle approval to BIDV trust bank deal

Released at: 19:26, 22/02/2017

SBV gives in principle approval to BIDV trust bank deal

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Japan's Sumitomo Mitsui Trust Bank to pick up 49% of BIDV Leasing Finance Company in deal.

by Duy Anh

The State Bank of Vietnam (SBV) gave in principle approval on February 21 to the conversion of partial ownership of the BIDV Leasing Finance Company (BLC) to Japan’s Sumitomo Mitsui Trust Bank (SMTB).

Formally 100 per cent owned by BIDV, SMTB is to have 49 per cent of BLC, which will change its name to BIDV-SuMi Trust (BSL), the SBV’s Official Correspondent No. 946 states.

SMTB, the largest trust bank in Japan and the fifth-largest commercial bank overall measured by assets, had total assets of $585.4 billion as at September 30, 2016 and total charter capital of $19.9 billion.

The two entered into a strategic partnership in n2013, followed by research and development (R&D) cooperation in many business projects, training, and technology transfer.

The two also signed a partnership contract on financial leasing on April 29, 2016 in Hanoi.

Under the contract, BIDV will sell 49 per cent of BLC to the Japanese bank, while at the same time raising charter capital at the company from VND448 billion ($19.6 million) to VND896 billion ($39.2 million), to meet the business development demand in the time to come.

BSL is the first Vietnamese financial leasing company to apply the joint venture model between a domestic commercial bank and an international financial institution. Together with the establishment of BSL, BIDV will have new financial products to complete their diversified product range, including credit, insurance, financial leasing, and securities trading.

Mergers and acquisitions (M&A) between banks and financial companies has become a trend over the last few years. SHB completed its M&A deal with Vinaconex-Viettel Finance (VFF) after two years of negotiating. With the acquisition of a financial company, banks can participate in the unsecured lending sector, which incurs higher risks but also higher returns than ordinary loans.

ACB’s management board has shown an interest in acquiring Posts and Telecommunications Finance Ltd (PTFinance). Founded in 1998, PTFinance has charter capital of VND500 billion ($22.1 million) and is 100 per cent owned by the State-run telecoms provider VNPT.

In an interview with Forbes in January, ACB Chairman Mr. Tran Hung Huy revealed that the bank has been conducting research to acquire a financial company in order to develop unsecured lending products. He affirmed that ACB has no plan to move into the field as yet, due to a fear of accumulating bad debts.

Last year, the VPBank-owned FE Credit-Consumer Finance Services added 2.7 million accounts, to take its total number of customers to 3.3 million. Business Monitor International (BMI) and the World Bank have attributed the strong growth of the consumer finance market to Vietnam’s rapid urbanization. The country is estimated to have some 18 million adults living in urban areas, which is expected to further increase considering the speed of urbanization.

Most are considered to be potential customers for financial services. To join the race, many foreign finance companies are ready to buy into local players. Japan’s Credit Saison and Shinsei Bank now respectively own 49 per cent of HD Saison and Military Bank’s MC Credit.

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