State-owned giant hopes to expand its operations via an M&A with another Vietnamese bank.
Vietcombank’s shareholders have approved a plan to take over an as yet unnamed smaller bank, at an extraordinary general meeting held recently.
The plan aims to make Vietcombank the leader in the country’s banking sector. Conducting a takeover is consistent with the objective of the State Bank of Vietnam (SBV) of increasing the size and quality of banks and reducing their overall number, to improve overall health and competitiveness.
The vote is certain to attract interest because it will kick off a new trend in banking mergers and acquisitions (M&As).
“It is true that Vietcombank intends to seek a merger with a smaller bank but the matter is still under consideration,” said Mr. Nghiem Xuan Thanh, CEO of Vietcombank.
Rumors in the stock market indicate that the target is the Vietnam Construction Bank (VNCB), because it received significant support from Vietcombank after its leaders were arrested in August.
Deputy Governor of the SBV Nguyen Phuoc Thanh told local media recently that he could not comment on the capacity for the two banks to engage in an M&A.
Meanwhile, a reliable source told Saigon Times that Saigonbank was Vietcombank’s target. This caught many by surprise, because Saigonbank is not among the weaker banks being forced into a merger. It has VND3.08 trillion ($146.67 million) in charter capital, and while this is among the lowest in the country it has not recorded losses for the last few years.
As at September 30 Saigonbank’s pre-tax profit was VND203 billion ($9.67 million), down 47.8 per cent compared to the same period last year, while net profit fell sharply to VND163 billion ($7.76 million). Its bad debt ratio as at the third quarter was 2.69 per cent, higher than the 2.24 per cent posted earlier in the year.
Vietcombank already owns 5 per cent of Saigonbank’s shares.