VietinBank and PG Bank’s merger plan moves forward

VietinBank, one of the country’s top lenders has finally announced its merger with PG Bank, whose strategic partner is national giant Vietnam National Petroleum Group (Petrolimex) that currently holds approximately 40 per cent of the bank’s share volume.

“Merging PG Bank into VietinBank will open up a brand-new development opportunity for Vietinbank towards a long-term strategic cooperation relationship with Petrolimex,” said Vietinank deputy general director Tran Minh Binh in the AGM.

According to VietinBank, PG Bank holds a major competitive advantage in terms of the stable Petrolimex-backed customer database, ready-to-use financial services at Petrolimex gas stations and agents countrywide, as well as PG Bank’s strength in foreign exchange and derivative activities.

VietinBank’s board of directors have noted that PG Bank is a creditable and potential bank that Vietinbank has long yearned for and sought to merge with, in a bid to become a leading bank in terms of scale and capability within the region.

PG Bank, by the end of 2014, presided over VND3 trillion ($140.17 million) worth of chartered capital and VND25.779 trillion ($1.2 billion) worth of assets. In addition, the bank has also attained a total of VND14.5 trillion ($677.57 million) in credit lines and VND168 billion ($7.85 million) in pre-tax profit. PG Bank currently has 16 branches and 63 transaction offices nationwide.

Following the merger, the combined chartered capital between these banks will bolster up to VND40.234 trillion ($1.88 billion) and the united entity will become one of the two biggest banks in Vietnam, comparable in size and capacity with other regional large-scale banks.

VietinBank proposed the share swap ratio at 0.9:1, meaning that they are willing to exchange 0.9 of their own shares for every single PG Bank share. As such, the 270 million Vietinbank shares will be allocated to PG Bank shareholders in exchange for 300 million PG Bank shares. Currently, one VietinBank share is traded at VND18,300 ($0.86) on the stock market, whilst a PG Bank share is recorded at VND8,000 ($0.37) at the OTC market.

In 2015, VietinBank set its profit target at VND7.3 trillion ($341.12 million) and the dividend payout ratio at 7-9 per cent of the bank’s chartered capital. The bank will also raise its registered capital by 32 per cent in 2015 to VND49.21 trillion ($2.3 billion) and boost its lending by 13 per cent this year while keeping its bad debts below the three per-cent threshold.

Currently 64.5 per cent of VietinBank is owned by the state and Japan's Bank of Tokyo-Mitsubishi UFJ has a 19.73 per cent holding.

During the AGM, VietinBank also requested its shareholders’ approval of an additional chartered capital of VND282 billion ($13.18 million), a financial provision at 10 per cent of the bank’s post-tax profit, equivalent to VND565 billion ($26.40 million), and a welfare and remuneration provision of VND1 trillion ($46.73 million).

Meanwhile, at PG Bank’s AGM, which was held on the same day, the bank’s general director Nguyen Quang Dinh said, “it is not only a matter of merging PG Bank with VietinBank, but also the participation of PG Bank’s major shareholder, Petrolimex, that really accounts for the whole deal. Whilst being with us for such a long time, Petrolimex has not entirely capitalised on the various advantages of the bank. As such, once merged with VietinBank, we expect to intensively utilise the full potential of both parties”.

Both banks have also confirmed that the M&A agreement had been completed in the first quarter and they expected to receive approval from the SBV thus June. After the merger, the new entity will carry the VietinBank trademark.