UFJ circles around VietinBank shares

According to Japanese media house Nikkei, Mitsubishi UFJ Financial Group’s Tokyo-Mitsubishi UFJ plans to buy 20 per cent of VietinBank at VND22,800 per share. The total value of the deal is expected to reach  JPY60 billion ($720 million).

Vietinbank or CTG on the Ho Chi Minh Stock Exchange is one of the biggest commercial banks in Vietnam with total chartered capital of VND26,217 billion ($1.26 billion), 80.31 per cent of which is held by the state.

The VND22,800 per share price is much higher than the current stock market price of CTG as its closing price last week was VND20,300 per share. It is also higher than the price VND21,000 per share Vietinbank offered to Canadian bank Nova Scotia, who was unsuccessful in becoming Vietinbank’s foreign strategic shareholder.

Marc Djandji, senior vice president at Indochina Capital, said it was a good price and Vietinbank should close the deal.

Concurring with Djandji, Saigon Securities Institution (SSI) head of research Tran Phong said it was a good price for Vietinbank, as Nova Scotia had asked for more benefits which would mean the price of CTG was only  VND19,000 per share.

“Given the banking system’s difficulties in dealing with non-performing loans and devaluating assets, the successful deal will be a win-win case for both sides.  Vietinbank can raise a large amount of capital when the stock market is decreasing,” said Phong.

By the end of last week, Vietinbank did not comment on the news. However, Vietinbank deputy director Nguyen Duc Thanh said the bank would finish selecting a foreign strategic shareholder at the year’s end. “The second  foreign strategic shareholder will hold a 15-20 per cent stake of Vietinbank, reducing the state ownership to around 60 per cent,” said Thanh

In early 2011, Vietinbank sold a 10 per cent stake to the International Financial Corporation (IFC), its first foreign strategic shareholder, at VND21,000 per share.

If Tokyo-Mitsubishi UFJ becomes Vietinbank’s strategic shareholder, it will be the latest of Japan’s three large banks to buy into a Vietnamese bank. In 2011, Mizuho Financial Group spent $567 million for its acquisition of 15 per cent of Vietcombank. Sumitomo Mitsui Financial Group spent $225 million to purchase a 15 per cent stake in Vietnam Export Import Bank, top tier joint stock commercial bank in Vietnam in 2008.

In the first three quarters of this year, Vietinbank reached a pre-tax profit of around VND6,000 billion ($288 million), achieving 66 per cent of its year-plan profit. Therefore, the bank had to ask for its shareholders to adjust its year plan profit down to VND7,500 billion ($360 million), instead of VND9,000 billion ($432 million). The lender’s dividend ratio would also be down to 13-15 per cent from 20 per cent last year.

According to Vietinbank, the bank’s non-performing loan of the first three quarters of this year is 2.61 per cent, equal to VND7,865 billion ($377 million), based on Vietnamese accounting  standards. The credit growth of the same period is only 2.57 per cent.