Sacombank's headquarters in Ho Chi Minh City
The State Bank of Vietnam has approved the long awaited merger between Sacombank, one of the country's largest partly private lenders, with the smaller Phuong Nam Bank (Southernbank).
The deal is expected to increase Sacombank's assets to over VND290.86 trillion (US$13.31 billion).
The merger has been planned since November as part of the government's efforts to consolidate the overcrowded banking sector. Three other mergers have been approved this year.
In a statement on its website, the central bank said it will assign some officials to join the management of Sacombank after the merger.
It will also manage the shares owned by Tram Be, deputy board chairman of Sacombank and a senior consultant to Southernbank, according to the statement.
As of last year end, Be and his family reportedly owned more than 20 percent of shares in Southernbank and nearly 7 percent in Sacombank.
According to a plan announced in June, the merger would increase Sacombank's capital to over VND18.85 trillion ($863.18 million) while its bad debt ratio will be 3 percent.
One Southernbank share will be swapped for 0.75 Sacombank share, and the dividend rate after the merger will be 3 percent a year.
Sacombank stock closed at VND17,700 on Thursday, down 6.8 percent from the beginning of the week.
Sacombank's net profits were estimated more than VND2.2 trillion ($99.13 million) last year, while Southernbank posted VND17 billion ($764,000) of net profits and bad debt ratio of 5.92 percent.