Eximbank embattled after scandals

Eximbank is facing an uphill battle to regain the trust of its shareholders and depositors, following a series of embezzlement and fraud scandals.

Eximbank has lost a great deal of trust from customers and shareholders, as some demand the board to step down

Loss of reputation

At last week’s annual general shareholders meeting, shareholders of Eximbank expressed their disappointment at the bank’s recent crises. According to the investors, the troubled bank has tainted its long-standing reputation by allowing dishonest staff members to steal depositors’ money over a prolonged time period. In particular, Chu Thi Binh lost VND245 billion ($10.8 million) of her savings in two years, and six customers in the central province of Nghe An saw VND50 billion ($2.2 million) of their deposits evaporate. Another customer recently accused the bank of stealing three taels of gold.

“How can you ask shareholders now to pay for your serious oversights?” a furious shareholder asked the board. Another investor wanted the board members to resign and take full legal responsibility for the cases.

Shareholders are also unhappy about Eximbank’s slow response to these controversies. A day before the meeting took place, Binh had sent another complaint letter,

demanding to get her money back immediately. However, it seems that her long wait will continue, as Eximbank representatives stood their ground that the bank must receive court orders before issuing her full compensation.

The depositors in Nghe An who lost $2.2 million were also upset that Eximbank postponed a court meeting with them last Wednesday to focus on its annual meeting on Thursday. According to the depositors, this delay goes against Eximbank’s promise to stand with customers.

In response to shareholders’ anger, CEO Le Van Quyet reiterated that the bank is working closely with regulators to protect customers’ rights. Five employees related to the Chu Thi Binh case, as well as 16 officers in the Nghe An case, have been arrested.

Quyet stressed that Eximbank detected the wrongdoings at its early stages and immediately notified customers. “In response to these scandals, we have revamped our security system, reinstated the fingerprint identification step, and started rotating branch leaders to prevent future misdeeds,” said Quyet.

Bui Quang Tin from the Ho Chi Minh City Banking University commented that Eximbank used to be a leading commercial lender with a well-established track record. The expert hoped to see new board members using their expertise and skills to bring Eximbank back to its former glory.

Analysts from Ho Chi Minh Securities believe that these embezzlement scandals may not affect Eximbank’s immediate profits, as court procedures tend to last for a few years. However, they pointed out that full compensation for Binh may eat up one quarter of the bank’s pre-tax profits for 2018.

Despite these scandals, Ho Chi Minh Securities still maintained a positive outlook for the bank, stating that its business activities have shown signs of improvement. In their report, analysts forecast Eximbank’s share prices to reach VND18,800 ($0.82) per share this year, trading at 16.9 times its expected earnings. As of last Friday, Eximbank’s shares stood at VND15,100 ($0.66) per share.

Inter-bank drama

Last week’s meeting at Eximbank was also shrouded in drama related to its board members. Specifically, four investors fought for one seat on the 11-person board, but three nominees dropped out of the race just one day before the meeting. The only remaining candidate – former CEO of Nam A Bank Luong Thi Cam Tu – was added to Eximbank’s current board, with approval from the State Bank of Vietnam (SBV).

In 2016, two other senior executives of Nam A Bank also joined the bid to lead Eximbank, fuelling speculations that the two lenders might merge. However, these two bankers later withdrew. At the time, there were also rumours that state-owned Vietcombank, which holds 8 per cent of Eximbank’s shares, might sell off its entire stake to Nam A Bank. So far, there has been no confirmation from elated parties.

At last week’s meeting, Eximbank also gave updates on its divestment from commercial lender Sacombank, as it was instructed by SBV to reduce cross-holdings in the banking sector. Throughout 2017, Eximbank sold its 8.76 per-cent stake at Sacombank, cutting all ties with the latter after six years.

In 2016, Eximbank unsuccessfully attempted to hold its annual general shareholders’ meeting three times due to conflicts and even physical violence between its shareholders over falling profits, rising bad debts, and low standards of corporate governance.

This was unprecedented in Vietnam’s banking history.

This year, Eximbank plans to earn VND1.6 trillion ($69.6 million) in pre-tax profit, up 57 per cent against 2017. Credit is expected to grow by 12 per cent.

VIR