Banking sector seeks the right moves

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Addressing the 13th National Assembly’s ongoing second section, Prime Minister Nguyen Tan Dung asserted re-arranging commercial banks, credit and financial institutions in the direction of expanding their scope in a rational manner and trimming feeble banking and credit entities was one of core tasks in 2012 and the following years.

The State Bank in respect to banking sector restructuring also assumed bank mergers and consolidation would yield bigger added value as banks could grow in scope.

Supportive of that idea, former State Bank governor Cao Sy Kiem said no bank could stay out of the restructuring and it was essential to properly point out bank’s impediments.

Standard Chartered Vietnam general director Louis Taylor assumed merging two small underperformed banks may not always result in a big stronger bank. A bigger feeble bank may come into existence instead.

According to industry experts, a number of factors were involved in successful mergers and acquisitions (M&A), specifically in the banking sector.

National Financial Supervisory Committee deputy chairman Ha Huy Tuan said making comprehensive appraisals of actual bank performance was vital to draw M&A plans in details.

“Hooking into M&A while banks’ strong and week points are not made clear is like making descriptions and giving drugs when the cause of illness remains unknown,” said Tuan.

The tie-up between Lien Viet Bank (LVB) and Vietnam Post Corporation (VNPost) to form Lien Viet Post Bank in mid 2011 shows that knowing each other advantages and disadvantages has entailed the deal’s success.

LVB wanted to become a retail bank but it is juvenile with a modest network. By taking over VnPost’s indebted Vietnam Postal Saving Company (VPSC), LVB could make use of the latter’s nationwide postal saving outlet network, meanwhile VnPost, through the deal, procured margin figures quadrupled VPSC’s book value and stamp out the postal saving firm’s bankruptcy fears.

According to State Bank expert Dao Minh Tu, Vietnam had developed a consistent legal corridor for M&A activities and the LVB-VnPost deal with its particular steps could serve as a useful reference for those wanting to climb onboard the M&A ship.

The Lien Viet-VnPost is also the single deal until present between a local bank and a local business entity.

Sorting suitable M&A models is also of paramount importance. In this regard, the process would yield better outcomes if the parties involved hooked into M&A on a voluntary basis instead of being forced to do so by competent state bodies, said Tu.