Fri. May 27th, 2022

VietNamNet Bridge – In order to become stronger, banks need to be bigger, or
they need to increase their capital.

Small banks have to become big to exist

 

Vietnam, banks, chartered capital, CAR, bad debt

There are three ways for banks to increase capital. First of all, they can issue
shares to existing shareholders,

However, this proves to be not a feasible method for small banks, because their
owners, who also hold stakes in other banks and invest in some other projects,
have become nearly run out of capital. Navibank and Western Bank, which both
have the same owner – Dang Thanh Tam – is an example.

Western Bank, finally, has chosen another way to follow – merging into
PetroVietnam Finance Corporation (PVFC)

Merging into other legal entities seems to be the choice of the majority of
banks. The best scenario is to legalize the zigzag ownership relationships among
banks. The State Bank would have to turn the green light on for “parent banks”
to acknowledge “their child banks.” ACB buys Dai A, Vietbank and Kien Long Bank,
for example,

For the remaining banks, issuing shares to the investors outside is the last
resort. Tien Phong Bank has successfully sold 20 percent of stakes to a group of
private investors, headed by Do Minh Phu, the owner of DOJI, a gold and gemstone
group. Meanwhile, having stakes in the bank is a perfect step taken by DOJI in
its business strategy of getting bigger through merger and acquisition deals.

Most recently, TrustBank said it would sell 85 percent of stakes to a group of
new investors. The group includes Thien Thanh Group, which buys 9.67 percent of
stakes, and the other 20 investors who buy the remaining shares.

However, analysts still keep doubtful about the actual financial capability,
saying they are not sure if they are powerful enough to take over 85 percent of
the stakes.

The “third way of life” for banks to increase capital, is calling capital from
foreign investors. The bank restructuring plan emphasizes that the state’s money
will not be used for the restructuring process. Meanwhile, domestic investors
have nearly got exhausted. Therefore, foreign investors prove to be the best
choice.

Owing Vietnamese banks have never been less attractive in the eyes of foreign
investors. However, at this moment, when there are too many sellers, foreign
banks have become choosier when considering the banks put on sale.

In general, only the best banks (the ones belonging to group 1 and 2) can catch
the attention from foreign investors.

According to Nguyen Xuan Thanh, a well-known economist, investors will only buy
bank shares if they can go for good prices. However, the biggest interest of
foreign investors is that they need to hold the controlling stakes in order to
have the right to make decisions relating to business strategies.

After selling all Sacombank’s stakes, Tareq Muhmood, General Director of ANZ
Vietnam, said ANZ would still seek the opportunities of making investment in
Vietnamese banks, but it would only buy stakes if it can hold the proportions of
stakes high enough to obtain the right to control the banks and integrate them
into ANZ system.

According to a finance expert, the small total assets of Vietnamese banks and
their bad corporate governance skills are not really attractive to foreign
investors. What they most want from Vietnamese banks is the hardware, or the
large network of branches existing in many provinces and cities nationwide.

NCDT

By vivian