Vietnam's leading partly private lenders, Eximbank and Sacombank, said on Tuesday they will consider merging as part of a cooperation plan, sparking high-volume trade in their shares which both closed higher on the day.
The two banks, both based in Ho Chi Minh City, plan to merge in the next three to five years and will seek approval for the merger from shareholders and government agencies, Eximbank said in a statement.
Vietnam's banking system, which has been hit hard by non-performing loans, has long been awaiting a consolidation of weak lenders. The country's central bank wants to reform nine lenders via mergers as part of a restructuring process started in 2011.
Eximbank and Sacombank are not among the nine lenders involved in the consolidation plan.
The two banks would sign a five-year cooperation plan in which they will support each other in lending, interbank activities, payments and in other areas, Eximbank said.
"This is the biggest merger deal so far, which will also draw interest from foreign investors," said Vu Duy Khanh, head analyst at Navibank Securities.
Eximbank, or the Vietnam Export-Import Commercial Joint Stock Bank, is already 15.13 percent owned by Sumitomo Mitsui Financial Group Inc.
Vietnam caps foreign ownership in a domestic bank at 30 percent. A foreign strategic investor could own 20 percent subject to government approval.
The merger, which was widely expected, will bring together Eximbank's capital strength and Sacombank's network, said Michel Tosto, director of institutional sales and brokerage at Ban Viet Securities.
Trading in both banks' shares jumped after news of the merger plan was released.
The volume of Eximbank shares traded hit 9.3 million, its highest in three months, while 1.08 million Sacombank shares changed hands, the heaviest volume in a month, exchange data showed.
Eximbank share rose 2.96 percent to close at 17,400 dong (84 U.S. cents) and shares in Sacombank gained 0.88 percent to end at 23,000 dong. The Ho Chi Minh Stock Exchange's VN Index closed up 0.92 percent at 484.01.
Eximbank currently owns a 9.73-percent stake in Sacombank, or Sai Gon Thuong Tin Commercial Bank, which is Vietnam's eighth-largest partly private lender by assets.