Canadians close in on Vietinbank deal

“Price negotiations are positive. Nova Scotia is willing to pay 3x [over VND30,000] per share but we have yet to agree,” Hung told VIR.

Vietinbank (trading code CTG) was priced at VND40,100 per share at its debut on the Ho Chi Minh Stock Exchange in July 2009. The stock was priced at VND25,300 per share when trading closed on Friday, September 16.

Vietinbank’s first strategic investor IFC recently completed payment for a 10 per cent stake and has already sent staff to the bank’s board of directors. The stake transfer is part of the bank’s recapitalisation programme. Following the potential deal with Nova Scotia, one of Canadia’s three largest banks, the Vietnamese state’s stake in Vietinbank will drop to 65 per cent.

Vietinbank figures show the lender’s after-tax profit for the year ended August 31 hit VND4,400 billion ($213 million), higher than the whole 2010’s $167 million. This is an impressive figure in view of the government’s tightened monetary policy to rein in inflation.

However, the bank’s bad debt by the end of August surged to 1.2 per cent of total outstanding loans or almost double the 0.66 per cent recorded at the end of last year.

Hung played down concerns about the dramatic rise of bad debt, telling VIR the bank would bring down the ratio to below 1 per cent by the end of this year. “There is nothing to worry about as our loan provision was two times as high as the bad debt.”

Based on international auditors’ calculations Vietinbank’s bad debt at the end of 2010 was more than 2 per cent, which is about four times higher than the figure the bank announced.

When it comes to Vietnamese banks’ bad debts, there is always a big gap between the figures reported by the banks themselves and international ranking agencies’ tallies. The State Bank said the bad debt ratio of Vietnam’s banking system was now over 3 per cent while Fitch few months ago said the ratio might be as high as 12-13 per cent.

Hung said Vinashin’s debt to Vietinbank was about VND1 trillion ($48.3 million). The near-bankrupt state-owned shipbuilder’s total debt was estimated at more than $4 billion.

The second largest bank by service network has 1,095 branches and transaction offices in Vietnam and is looking further afield. Two weeks ago it opened a branch in Frankfurt, a first for a Vietnamese bank. The bank is now preparing to open a branch in Berlin and one in Laos.

Hung said mergers were likely to be a feature of Vietnam’s banking system in future and Vietinbank was “willing to take over any bank with a merger demand” and that “the matter just rests on conditions.”

Vietinbank plans to raise its total assets from the current $22 billion to at least $60 billion by 2015. It also eying a boost to its chartered capital to VND27-28 trillion by November from the current VND16 trillion ($773 million). “We aim to push up our retail banking segment and focus more on small and medium enterprises while state-owned corporations in the fields of oil & gas, electricity, fertilisers, chemicals, cement and steel remain important borrowers,” Hung added.