Governor of the State Bank of Vietnam (SBV) Le Minh Hung says that the Politburo has approved a restructuring project to this year handle five banks comprising three banks purchased at zero dong by SBV, DongA Bank and Sacombank after merger to ensure the safety of the banking system in the upcoming time.
The Politburo has made detailed handling conclusions in the project comprising specific sub-projects for each bank. Basing on that, SBV has completed and submitted the project to the Government and the Prime Minister to decide at the soonest.
That is part of the second phase of the banking system restructuring project in 2016-2020 which SBV is improving as per requirement by the Government to report to the Politburo.
In the first phase of the project, SBV has handled nine weak join stock banks through mergers and acquisitions (M&A). Of these it had to buy three banks at zero dong because of long loss-making situation including OceanBank, CB and GPBank and put DongA Bank under special surveillance.
So far, merged banks have operated stably with ensured liquidity and not negatively affected the banking system. SBV has assigned large state commercial banks to assist the zero dong banks to reorganize with some positive changes.
After two years of the purchase deal, CB has become a stated owned bank with the assistance from Vietcombank. Last year, CB officially returned the market and was permitted to perform sufficient activities of a retail bank.
Deep debt handling effectiveness has been improved. Of these, CB has sold VND500 billion (US$21.93 million) to Vietnam Asset Management Company and tackled nearly VND3 trillion ($132 million) related to loans of Phuong Trang Transport Company.
Vietinbank has assigned personnel to manage GP Bank which capital mobilization has posted a year on year increase of 8.7 percent by the end of 2016 and outstanding loan has moved up since April this year.
Oceanbank has gained profitable trading activities in two consecutive years 2015-2016, contributing in solving losses in the past.
DongA Bank has operated stably and ensured liquidity. Its affordability was 20.1 percent by the end of last year, 10 percent higher than regulation. The bank reclaimed VND4,192 billion ($184 milion) deep debts last year after the special surveillance started on August 13, 2015.
The second phase of the banking restructuring project will focus on cleaning weak banks through M&A activities with the likely deal this year being the merger of PGBank into Vietinbank. The two banks’ shareholders meetings have approved the plan since April 2015.
Vietinbank has so far supported PGBank to complete a restructuring project and submit to SBV and the Government for approval.
At a conference to implement missions in 2017, the chairman of Vietinbank’s boards of directors affirmed that the bank will implement the financial ability improvement project for commercial banks on schedule comprising the PGBank merger.
Financial banking expert Can Van Luc claimed that three zero dong banks should be merged into commercial banks which are assisting them to restructure. However this needs tools and mechanisms for the state commercial banks to accept the merger.
Previously, Asian Development Bank and a domestic private partner revealed a plan to purchase one of weak commercial banks of Vietnam via M&A. They have not made clear which bank. There are many small banks with legal capital of VND3 trillion ($132 million) or a bit higher such as VietA Bank, OCB, SaigonBank, BacA Bank, VietCapital Bank.
According to experts, many small banks do not want to merge and have built plans to improve financial potential for self-restructuring but implementation is unlikely easy.
The fact shows that many banks intending to raise chartered capital have yet to be successful because their shares have no longer been attractive to investors. Weak management and years long profit fall has made merger the best solution.
Photo: CBR Investment AG