M&A picks up speed in banking

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M&A picks up speed in banking

Vietnam News - 7/20/2015 1:20:08 PM

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At an extraordinary meeting on July 11 Sacombank shareholders approved plans to merge with Southern bank and issue three-fourths of a share for each share of the latter

Recently many other mergers and acquisitions (M&A) have taken place in the financial sector, including between BIDV and MHB, Mekong Bank and Maritime Bank, and HDB and Dai A Bank.

Many other credit institutions have been targeted for restructuring through M&A in the near future — like Vietcombank and Sai Gon Bank, PGBank and VietinBank, DongA Bank and ABBank, NamA Bank and Eximbank.

According to SBV and the banks, M&A would make a positive contribution to the restructuring process and also speed up implementation of the Government and SBV's policies to stabilise the economy and banking system.

Analysts also say the continuing M&A in the banking sector will help resolve the cross-ownership problem as required by Circular No 06/2015/TT-NHNN, which took effect on July 15.

The circular is designed to tackle the problem of shareholding in excess of legal limits by individuals and institutions, which, along with cross-ownership, has been identified as a critical weakness of the banking sector.

It also provides a timeline and spells out procedures to bring ownership thresholds in line with those stipulated in Article 55 of the Law on Credit Institutions, and penalises non-compliant shareholders by suspending dividends and their right to serve on the board of directors among other sanctions.

Article 55 restricts ownership in credit institutions as follows: individuals may not own more than 5 per cent of the chartered capital of a credit institution; an institutional shareholder may not own more than 15%; and a group of shareholders together may not own more than 20%.

But in reality, many individuals and institutions have much higher stakes in local banks, enabling them to influence them and increasing the likelihood of the banks being less than transparent in their business activities.

According to the central bank, five of the total 33 banks in the country breach the ownership law.

Securities companies have revealed that EVN still owns 16.02% of ABBank, PetroVietnam (PVN) has a 52% stake in PVcomBank and the Masan Group (MSN) has 19.5% of Techcombank's shares.

Vietcombank is a significant shareholder in four lenders — Eximbank (8.19%), Military Bank (11%), Phuong Dong (4.7%), and Sai Gon Cong Thuong (nearly 5.3%).

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