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Banking & Finance

Vietcombank submits restructuring plan for weak lender

Released at: 18:00, 09/02/2017

Vietcombank submits restructuring plan for weak lender

Photo: Archives

Bank involved in restructuring of unnamed struggling bank.

by Duy Anh

Vietnam’s largest lender by market value, Vietcombank, is currently waiting for approval from the government and the State Bank of Vietnam (SBV) to participate in the restructuring process of a troublesome bank in the country’s banking sector.

“Vietcombank has proactively been helping the weak bank and has registered a restructuring plan with SBV Governor Le Minh Hung and submitted it to the government,” Chairman Nghiem Xuan Thanh said during a recent working session with Deputy Prime Minister Vuong Dinh Hue in Hanoi.

Once approved by the government and the central bank, “Vietcombank commits to being a pioneer bank in successfully restructuring a weak lender,” Mr. Thanh went on. “Though this is a political mission, a transparent policy mechanism will be created to negate any disadvantages for Vietcombank’s business performance when the bank participates in the restructuring process.”

While the name of the weak lender is yet to be made public, Vietcombank was earlier assigned to support VNCB in regard to certain activities, including capital mobilization, currency trading, credit, management, and providing and exchanging information. Vietcombank’s executives were unavailable for comment at the time of writing.

Other commitments from the bank’s Chairman to Deputy Prime Minister Hue included a fall in lending rates to enterprises and a rise in revenue from service fees.

Vietcombank was the first lender to buy back all debts it sold to the Vietnam Asset Management Company (VAMC). The initial amount of cumulative debts was VND6.5 trillion ($288 million), while the value of VAMC’s bonds in exchange was only VND4 trillion ($177 million). The bank saw its 2016 after-tax profit surge 28 per cent while its bad debt ratio was kept at 1.48 per cent as at December 31, the bank’s consolidated financial statement for the fourth quarter of 2016 reveals.

Pre-tax profit stood at VND2.2 trillion ($97 million) in the fourth quarter, for VND8.5 trillion ($377.5 million) during the year as a whole, up 24 per cent against 2015. After-tax profit reached VND6.85 trillion ($303.3 million), up 28 per cent.

Earnings-per-share (EPS) improved, rising 16 per cent to VND1,897 ($0.08). As at the end of 2016, bad debts totaled VND6.84 trillion ($303 million), equal to 1.48 per cent of total outstanding loans and down 0.36 per cent compared to the beginning of the year.

Its share price rose 36 per cent during the year, giving it a market value of $6.2 billion. The lender trades at about three times the book value, compared with an average of 1.1 times for listed Vietnamese banks.

Vietcombank’s largest shareholder, the SBV, owns 77 per cent, while the Mizuho Financial Group Inc. is its second largest shareholder, with 15 per cent.

The SBV found itself shoring up ailing institutions three times in 2015, transforming OceanBank, VNCB, and GPBank into wholly State-owned concerns in a move to negate any concern over the health of other banks. Senior executives from State-owned banks have become leaders of these distressed banks, with Vietinbank executives appointed to manage OceanBank and GPBank while Vietcombank Deputy CEO Mr. Nguyen Van Tuan joined VNCB in March 2015.

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