VietinBank, the largest of Vietnam's banks part-owned by private companies, on Tuesday said it will merge with unlisted domestic lender Petrolimex Group Bank, in the latest move to reform the country's troubled financial sector.
Vietnam's central bank says it expects six to eight mergers this year as it seeks to strengthen an overcrowded sector of more than 40 lenders, many of which are considered by analysts to be under-capitalised and laden with bad debts.
PG Bank, 40 percent owned by top fuel importer and distributor Petrolimex, has a large competitive edge due to factors including its stable customer base and strength in foreign exchange and derivatives, VietinBank said in a statement to shareholders.
"Merging PG Bank into VietinBank will open VietinBank to new opportunities to develop, aiming at a strategic, long-term and organic cooperative relationship," VietinBank deputy general director Tran Minh Binh told shareholders at a meeting.
Hanoi-based VietinBank, or the Vietnam Bank for Industry and Trade, will issue more shares for conversion with PG Bank shares under the merger plan which was approved by shareholders on Tuesday.
"This merger is good for the banking system at the moment as weak lenders are being eliminated," independent financial expert Nguyen Tri Hieu said.
VietinBank shares advanced 1.1 percent after it announced the merger plan.
VietinBank Chairman Nguyen Van Thang said the bank was open to more mergers and acquisitions in future. He did not elaborate.
VietinBank will raise its registered capital by 32 percent this year to 49.21 trillion dong ($2.3 billion) and aims for a pretax profit of 7.3 trillion dong, similar to 2014.
The bank aims to boost lending this year by 13 percent while keeping bad debt below 3 percent of loans, in line with the central bank's projection of Vietnam's credit growth of 13 percent to 17 percent in 2015.
VietinBank is 64.5 percent owned by the state while Japan's Bank of Tokyo-Mitsubishi UFJ has a 19.73-percent holding.
Shareholders have agreed to list all 2.4 billion shares owned by the state on the exchange, helping to boost the stock's liquidity, VietinBank said.
The bank will convert its Laos branch into a fully-fledged bank as part of its network expansion, VietinBank said.
The Vietnamese government plans to grow VietinBank and Vietcombank, the top lender by market value, into regionally competitive lenders.