M&A in Vietnam's banking industry set to warm up next year
Merger and acquisition (M&A) in the banking industry is expected to enter a new stage next year as small banks have to increase capital to meet Basel II regulations while the government wants to reduce the number of banks in the country.
M&A in the banking industry has remained quiet in the past two years after seeing a record in the 2011-2016 period, when seven M&A deals were put through with the participation of 16 banks, reducing 10 banks in the system.
Caption: PG Bank will finalize the merger with HD Bank next month
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For many banks, if they cannot increase the required capital, their CAR would go below the minimum level stipulated by the Basel Committee on Bank Supervision’s Basel II norms. They thus will have to consider merger options.
Moreover, the number of banks in Vietnam is still quite big, and reducing this number is inevitable. Meanwhile, the government has so far also determined attempt to further reduce the number of banks.
Vice Chairman of the National Assembly’s Economic Committee, Nguyen Duc Kien, said that restructuring of the banking sector with more acquisitions and mergers is intended for Vietnam to have several major banks in the Southeast Asian region by 2021.
According to experts, M&A is the opportunity for banks to enhance financial capacity, expand markets and scale to achieve better growth. Besides, thanks to the M&A, the government does not have to take too many efforts to handle the consequences and help stabilizing the financial market.
Deals on the cards
After a long time being quiet about M&A, many banks have so far also revealed upcoming plans on the issue.
At this year’s annual shareholders meeting, LienVietPostBank said that it was considering raising the charter capital, restructuring shareholders, completing a merger, and restructuring credit institutions as requested by SBV.
VietinBank, one of the biggest domestic banks, after canceling its plan on taking over PG Bank, has said that an M&A plan with another bank is quite possible if it is a good opportunity for the bank to further grow.
VPBank has also said it wants to raise charter capital to prepare for M&A deals and other business plans.
Besides, large banks are also considering seeking foreign capital to complete capital increase plans. BIDV, for example, is preparing to sell a 15 percent share to KEB Hana from South Korea.
Most foreign investors who are interested in the offering of Vietnamese banks are “shark investors” such as GIC, Dragon Capital, VinaCapital, Deutsche Bank AG, Deccan, JPMorgan Vietnam Opportunities Fund, CAM Bank, Clermont, Charlemagne and PYN Elite.
Recommending investors about the way to participate in Vietnam's financial market, representative of South Korea’s Lee & Ko Law Firm said the Vietnamese financial market is quite potential while the application for license to establish a bank is very difficult.
Therefore, purchasing shares or acquiring 100 percent stake in ailing banks are the best opportunities for investors.
Banking expert Can Van Luc said Vietnamese banking sector now is getting much better than the previous time, so the fact that foreign investors are interested in is understandable.
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