Vietinbank and PG Bank deal collapses

The Viet Nam Bank for Industry and Trade (VietinBank) and the Petrolimex Group Commercial Joint Stock Bank (PG Bank) have called off a potential merger after nearly two years of negotiations.

The information was announced by Vietinbank, one of Viet Nam’s largest state-owned commercial banks, in its recently-released audited consolidated financial statements.

PG Bank is a subsidiary of Viet Nam’s top fuel importer and distributor Viet Nam National Petroleum Group (Petrolimex), which is currently holding a 40 per cent stake in the unlisted domestic lender.

As stated in Vietinbank’s financial statement, VietinBank and PG Bank will report to the competent authorities of each party for approval to terminate their merger plan. They will also organise a shareholder meeting to discuss a restructuring plan on April 21.

The cancellation followed a request by the State Bank of Viet Nam (SBV), which is Vietinbank’s largest shareholder, controlling 64.46 per cent of the bank. SBV insisted that VietinBank review and assess PG Bank stock valuation results, calculating and renegotiating the stock swap ratio agreed by the two sides earlier.

This dashes investors’ hopes for a long-term strategic cooperation between the new bank and large corporations in the energy sector which would be boosted significantly by an expansion of capital, networks, and customer base.

PG Bank got the approval from its shareholders for the merger with Vietinbank on April 14, 2015, in accordance with the overall plan of SBV on the banking sector restructuring process regarding the handling of weak lenders.

On May 22, 2015 in Ha Noi, Vietinbank signed the M&A deal with PG Bank, and a comprehensive co-operation agreement with Petrolimex.

If the merger was approved by SBV, the new financial institution would continue to be named VietinBank, and would become the largest and 2nd largest bank by registered capital and assets in Viet Nam with VND40 trillion (US$1.85 billion) and VND686.9 trillion, respectively.

VietinBank shareholders also agreed on the swap ratio of 1:0.9, or one PG Bank share will be exchanged for 0.9 Vietinbank share and the Ha Noi-based bank will issue more shares for conversion with PG Bank shares.

According to Chairman of Vietinbank Nguyen Van Thang, the merger, if approved, would have helped the Vietinbank boost capital, develop expanded branches, and foster retail services, in addition to stepping up lending and investment.

It would also open up new opportunities for VietinBank and Petrolimex to head strategic cooperation, which would benefited shareholders, customers, and the state, Thang told participants at the signing ceremony of the M&A deal held in May 2015.

Following the merger, Vietinbank could enlarge its network with the help of PGBank’s 16 branches and 63 offices nationwide.

As PG Bank was a strategic partner of Petrolimex, Vietinbank would also capitalise on PG Bank’s significant competitive advantages, based on its network of 6,200 filling stations across the country, to enlarge its network to communes, Thang said.

However, the move was not finalised as the SBV did not officially approve the merge.

VietinBank is 64.5 per cent owned by SBV, while Japan’s Bank of Tokyo-Mitsubishi UFJ has a 19.73 per cent holding.

PG Bank, formerly known as Dong Thap Muoi Joint Stock Commercial Bank, had a chartered capital of VND3 trillion (US$138 million) and total assets of about VND25.78 trillion (US$1.19 billion) as of the end of last year.

Viet Nam News contacted Vietinbank for further information but the bank was unable to provide any immediate comment at the time of going to print.