Mergers favored as Vietnam banks prepare to restructure

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Eximbank's merger with Sacombank is expected to happen in several years after the two signed a strategic partnership pact last year. Photo courtesy of VnEconomy

Mergers are going to be a trend for banks in Vietnam as many seek to fortify themselves to deal with the economic downturn, industry insiders say.

Le Thi Bang Tam, chairwoman of Ho Chi Minh City-based HDBank, said the central bank has in principle approved its merger with the Dai A Bank based in the neighboring Dong Nai Province. The merger has also been accepted by its shareholders, Tam said in a Thoi Bao Kinh Te Saigon Online report.

Leading partly-private lenders Sacombank and Eximbank also had their shareholders agree to their merger, which is expected to happen several years after the two signed a strategic partnership pact last year.

Le Hung Dung, chairman of Eximbank, Vietnam's eighth largest lender by assets, said merger is the shortest route to expansion, to avoid "strict regulations of the central bank on opening branches or expanding operations."

The Military Bank and ABBank have also proposed that shareholders allow them to consider possible M&A opportunities.

A Military Bank official said several banks have offered to partner with it, but they were not considered "appropriate" on the basis of their financial security and bad debt ratio.

DongA Bank already has a potential merger plan passed by its shareholders last year and is considering its options among several banks.

Meanwhile, a number of small lenders are looking at mergers as a way to avoid being eliminated from the market.

Partly private Phuong Tay Bank, also known as Western Bank, and Petrovietnam Finance Corp (PVFC), the finance arm of state oil and gas group Petrovietnam, have completed formal steps for their merger, which is part of the central bank's scheme to restructure lenders saddled with bad debt.

The merger will turn them into a mid-sized bank with combined equity of VND9.16 trillion (US$438 million), according to the plan presented by Westernbank, Vietnam's 29th largest partly-private lender by assets.

An official from the State Bank of Vietnam said the central bank has approved Navibank's restructuring plan with the participation of new shareholders who have not been identified.

Nguyen Hoang Minh, deputy director of the central bank's Ho Chi Minh City branch, said the bank has ordered lenders to accord priority to restructuring this year and many of them have chosen to do it through mergers.

The State Bank of Vietnam has said around 10 banks lenders will be restructured by the end of this year.

So far, three small lenders in Ho Chi Minh City have been merged to form the Saigon Commercial Bank, while Habubank has been acquired by Saigon-Hanoi Bank.

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