Banks weigh up options through exchange shake-up

Banks weigh up options through exchange shake-up. Photo: cafef.vn

The Hanoi Stock Exchange (HNX) recently approved for around 308 million of shares of Saigon Bank for Industry and Trade (Saigonbank) to be traded on the Unlisted Public Company Market (UPCoM).

The bank’s ticker will be SGB, and the total shares will be equivalent to VND3.08 trillion ($134 million). Its latest agreement with consultancy McKinsey&Company is envisaged to help the bank diversify its funding sources from overseas expertise.

Saigonbank is the second domestic lender to be permitted to trade on the UPCoM this year, after 317.1 million of shares from Viet Capital Bank caught investors’ attention last month.

In the same boat, LienVietPostBank also showed intentions of switching from the UPCoM to the Ho Chi Minh City Stock Exchange (HSX) and raising its foreign ownership limit from 5 to 9.99 per cent to tap into overseas cash.

Privately-held lender ACB, which is currently listed on the Hanoi bourse, signalled its ambition of listing on the HSX in November or December.

The lender is looking to complete 30 per cent of stock dividends next month before moving to the main board.

The shift should allow ACB to be included in several indices, including the VN30 (at about 4 per cent weighting according to management); VNDiamond (10 per cent estimated weighting); VNFIN Select (12 per cent estimated weighting), and VNFIN Lead (12 per cent estimated weighting).

Meanwhile, SHB and VIB may also follow suit, saying they would place their focus from the capital city’s exchange to its southern counterpart.

The upcoming move is slated to put ACB, SHB, and VIB on the radar of more high-profile investors, as the HSX is set to attract more deep-pocketed and larger institutional investors.

On the other hand, some lenders have been caught between a rock and a hard place when deciding whether they should go public or not, as market turbulence has pushed traders away from risky assets.

“Vietnamese banks like us have fallen victim to pandemic-induced uncertainties. It would not be a wise move if we file for an initial public offering (IPO) at the moment,” an MSB representative explained at its shareholders’ meeting.

OCB and Nam A Bank have worked hard towards public listing goals for years, but their dreams have not come true yet. Nam A Bank, after qualifying for Basel II criteria, now seems eager to push the listing button.

Trinh Van Tuan, chairman of OCB, mentioned that 2017 and 2018 were a prime time for the bank to file for an IPO, but strategic French partner BNP Paribas offloaded its entire 18.68 per cent after a decade-long cooperation. Hence, OCB was urged to seek other alliances for capital accretion momentum.

Fortunately, earlier this year, the bank sold 15 per cent of its stakes to Japanese Aozora Bank in a deal roughly estimated at $139 million – an essential step towards the listing target.

“Plunging stocks at the moment make the market inhospitable for IPOs. Thus, we are waiting for better listing conditions to ensure investors’ interest to be protected and maximised,” said Tuan.

Currently, there are 19 listed banks with 10 listed on the HSX, three on the HNX, and six on the UpCOM.

According to the Vietnam Stock Exchange plan, the HSX will be in charge of the stock market while the HNX will be responsible for the bond and derivatives markets. This urged banks to expedite their move from the HNX and the UPCoM to the HSX this year.

According to Nguyen Thi Thanh Huyen, financial analyst at KB Securities, under the restructuring plan of the stock market and the insurance market until 2020, all commercial banks must be listed and registered for transactions on the official market.

“This regulation limits the implementation time to the end of 2020, forcing many banks such as Nam A Bank, OCB, and MSB to execute an IPO procedure this year. Going public also enhances transparency and integrity in banks’ results and supports governance and enforcement of regulations to ensure system security,” said Huyen.

“Plus, IPO timing should be taken into careful consideration in order to create added value for shareholders. The chances are the price per share could easily fall below the expected level if the bank makes a bad timing.”

On the other hand, there are still roadblocks hampering the rosy outlook of IPOs, especially banks’ financial health being eroded by the ongoing coronavirus crisis. Lacklustre business performance, a high ratio of non-performing loans, and issues related to complying with regulations on disclosure responsibilities are also adding fuel to the fire.

In the case of state-owned lender Agribank, its efforts might come up against a brick wall as the bank remains bogged down with its divestment target and is disqualified from attaining Basel II standards.

“According to the Ministry of Finance (MoF), the biggest problem is Agribank’s large scale in terms of network with over 2,300 branches and transaction offices, including a number of housing facilities that have not been approved by the MoF,” Huyen told VIR.

“Besides that, there are still shortcomings in equitisation regulations regarding state-owned enterprises, such as the comparative inventory of individual customer deposits and handover of settled debts, and large quantity of risks for the Vietnam Debt and Asset Trading Corporation.”