Bank merger deals near

Several banks are scheduled for M&A deals in the coming year Photo: Le Toan

An insider told VIR last week that Mekong Development Bank (MDP) was about to merge with Maritime Bank. The source added that the deal had already been approved by authorities and would  be completed by July.

MDP and Maritime bank will hold their annual shareholder meetings on April 15 and 19, respectively, during which they are expected to seek approval for the merger.

Maritime Bank currently owns a 10.16 per cent stake of MDB. Other shareholders include Phuc Tien Investment with 10 per cent, Maritime Bank Securities with 7.39 per cent, An Phuc Securities Investment Management Fund with 13.34 per cent and Singaporean Temasek’s Fullerton Financial Holdings with 20 per cent which is MDB’s largest shareholder.

The charter capital of Maritime Bank is currently VND8 trillion ($380.9 million) and MDB’s VND3.7 trillion ($176.2 million).

Maritime Bank reached pre-tax profits of VND401 billion ($19 million) in 2013. In 2014 the bank has a more modest profit target of VND265 billion ($12.6 million) as its credit loss provisions have risen to VND700 billion (33.3 million).

Maritime Bank did not pay out dividends to shareholders in 2013 andas planned this will continue in 2014.

Mekong Bank also saw a decline in its business results in 2013. Pre-tax profits only hit VND110 billion ($5.2 million), far behind the VND300 billion ($14.28 million) goal. It paid out dividends of only 1.5 per cent last year.

Vietcombank similarly announced it was likely to merge with another credit institution in the near future, as conditions allowed.

It did so at the annual meeting of managers of Mizuho Bank, the bank’s strategic shareholder of 15 per cent.

Vietcombank, with total assets of VND476.761 trillion ($22.27 billion) in 2013, posted a gross profit of VND5.73 trillion ($272 million) last year, down 0.5 per cent against 2012.

Another bank prepping for M&A in 2014 is Vietinbank, also one of Vietnam’s largest banks.

Prior to its annual shareholders meeting on April 18, PGBank issued a document about a planned merger with Vietinbank for approval. Accordingly, Vietinbank would buy up to 99 per cent of the bank.

At current, Petrolimex is PGBank’s biggest shareholder with 40 per cent. Under the state-owned enterprise restructuring roadmap, Petrolimex must divest from its non-core businesses, including its stake in PGBank.

Previously, a Vietinbank source said that a credit institution would be merged with Vietinbank within the year. The plan has been approved by the major shareholders and is expected to be presented to the annual shareholder meeting this year. “It has also been approved by authorities,” the source said.

As of 2013, Vietinbank’s total assets and charter capital stood at VND576.368 trillion ($27.4 billion) and VND37 trillion ($1.76 billion). The lender achieved pre-tax profits of VND7.75 trillion ($369 million) in 2013. The bank has two foreign strategic shareholders – Tokyo-Mitsubishi UFJ, Ltd. and IFC.

Speaking at the monthly government meeting early this month, State Bank of Vietnam Governor Nguyen Van Binh said he expected six or seven more banks to either merge or be acquired by larger institutions in 2014, bringing the total number of banks that have been dissolved or had their licenses revoked to 7-10.

It has been forecast that M&A will be quite active this year. According to financial information supplier StoxPlus, the market will see an upsurge in M&A as the number of commercial banks are reduced to 13-15 by 2017 as planned.

Under newly-released rules, the government could allow the cap on foreign ownership in weak banks to be higher than 30 per cent on a case-by-case basis, and this has caught foreign banks’ attention. 

According to economic experts, the pressure on state-owned enterprises to divest from the banking sector in 2014-2015 will also be a catalyst behind increased M&A.