Thailand
M&A in Vietnam’s banking sector forecast to see big changes in 2019
The Hanoitimes – M&A deals in Vietnam’s finance and banking sector will rise significantly this year, given by an improved business performance of local banks and a government regulation to require banks to meet stricter capital regulations as part of Basel II Accord standards by 2020.
Experts anticipated the Vietnamese finance and banking sector will experience a sharp increase in merger and acquisition (M&A) deals in 2019 as positive signals for the surge have been seen right in the first months of the year.
Early this year, on January 9, Bank for Foreign Trade of Vietnam (Vietcombank) started off with an announcement that it successfully completed a private placement of more than 111.1 million new shares to Singapore’s sovereign wealth fund – GIC Private Limited (GIC), and Mizuho Bank Ltd (Mizuho), one of Japan’s largest financial services providers, raising a total of VND6.2 trillion (US$265 million) equity investment.
Following the move, during a meeting with Prime Minister Nguyen Xuan Phuc in February, Kanetsugu Mike, CEO of Japan’s Mitsubishi UFJ Financial Group (MUFG) said the group is willing to support state-run VietinBank in boosting its charter capital for business facilitation.
Last week, Kim Gwang Soo, chairman of NongHuyp Group, also proposed supporting the restructuring process of Vietnam Bank for Agriculture and Rural Development (Agribank) when he met chairman of the largest Vietnamese bank by assets Trinh Ngoc Khanh.
Detailed proposals on the restructuring were not mentioned at the meeting but analysts said the move would pave the way for South Korea’s fourth largest financial institution to become a strategic shareholder of Agribank, which is due to launch an initial public offering at the end of this year.
Earlier, Thai financial firm Srisawad Corporation also said it is waiting for approval from Vietnam’s central bank for a deal to acquire Finance Leasing Company I (ALC I) of Agribank at an estimated cost of VND523 billion (US$22.45 million).
Besides Agribank, the market is also expected to see the completion of a deal between Bank for Investment and Development of Vietnam (BIDV) and South Korea’s KEB Hana Bank in 2019.
Under the expected deal, BIDV will issue 603 million new shares in a private placement for the subsidiary of Hana Financial Group, reducing the state holding to 80.99 percent from the current 95.28 percent.
Not only major state lenders, but small-cap banks, including Nam A Bank and OCB, are also proving very appealing to foreign investors.
Nam A Bank’s General Director Tran Ngoc Tam unveiled that the bank would sell stakes to a foreign strategic partner before debuting on the stock market as it has so far agreed on the principles of the cooperation.
Push from Basel II Accord
According to experts, M&A deals in Vietnam’s finance and banking sector will rise significantly this year, given by an improved business performance of local banks and a government regulation to require banks to meet stricter capital regulations as part of Basel II Accord standards by 2020.
Bui Quang Tin, CEO of Bizlight Business School, said besides efforts of the government to call for foreign inflow to the banking sector, improvement in business performance and asset quality of local banks also contributes to intensifying trust of foreign investors.
A report released recently by international rating agency Moody’s also predicted Vietnamese banks will gain further improvement in profitability in 2019, again because of wider net interest spreads and lower credit costs.
“Vietnamese banks achieved a higher aggregate return on assets for a second year running, registering a rise of 1.1 per cent in 2018 from 0.9 per cent in 2017. Aggregate net income for the banks also rose 35 percent to VND70 trillion (US$3 billion) last year from the previous year, despite a moderation of credit growth,” Moody’s said in the report.
In addition, Tin said local banks are also expecting to have capital from foreign shareholders to meet the central bank’s Basel II standards due to the underdevelopment of the domestic capital market.
Following the move, during a meeting with Prime Minister Nguyen Xuan Phuc in February, Kanetsugu Mike, CEO of Japan’s Mitsubishi UFJ Financial Group (MUFG) said the group is willing to support state-run VietinBank in boosting its charter capital for business facilitation.
Last week, Kim Gwang Soo, chairman of NongHuyp Group, also proposed supporting the restructuring process of Vietnam Bank for Agriculture and Rural Development (Agribank) when he met chairman of the largest Vietnamese bank by assets Trinh Ngoc Khanh.
Detailed proposals on the restructuring were not mentioned at the meeting but analysts said the move would pave the way for South Korea’s fourth largest financial institution to become a strategic shareholder of Agribank, which is due to launch an initial public offering at the end of this year.
Earlier, Thai financial firm Srisawad Corporation also said it is waiting for approval from Vietnam’s central bank for a deal to acquire Finance Leasing Company I (ALC I) of Agribank at an estimated cost of VND523 billion (US$22.45 million).
Besides Agribank, the market is also expected to see the completion of a deal between Bank for Investment and Development of Vietnam (BIDV) and South Korea’s KEB Hana Bank in 2019.
Under the expected deal, BIDV will issue 603 million new shares in a private placement for the subsidiary of Hana Financial Group, reducing the state holding to 80.99 percent from the current 95.28 percent.
Not only major state lenders, but small-cap banks, including Nam A Bank and OCB, are also proving very appealing to foreign investors.
Nam A Bank’s General Director Tran Ngoc Tam unveiled that the bank would sell stakes to a foreign strategic partner before debuting on the stock market as it has so far agreed on the principles of the cooperation.
Push from Basel II Accord
According to experts, M&A deals in Vietnam’s finance and banking sector will rise significantly this year, given by an improved business performance of local banks and a government regulation to require banks to meet stricter capital regulations as part of Basel II Accord standards by 2020.
Bui Quang Tin, CEO of Bizlight Business School, said besides efforts of the government to call for foreign inflow to the banking sector, improvement in business performance and asset quality of local banks also contributes to intensifying trust of foreign investors.
A report released recently by international rating agency Moody’s also predicted Vietnamese banks will gain further improvement in profitability in 2019, again because of wider net interest spreads and lower credit costs.
“Vietnamese banks achieved a higher aggregate return on assets for a second year running, registering a rise of 1.1 per cent in 2018 from 0.9 per cent in 2017. Aggregate net income for the banks also rose 35 percent to VND70 trillion (US$3 billion) last year from the previous year, despite a moderation of credit growth,” Moody’s said in the report.
In addition, Tin said local banks are also expecting to have capital from foreign shareholders to meet the central bank’s Basel II standards due to the underdevelopment of the domestic capital market.
Source: http://www.hanoitimes.vn/economy/2019/03/81E0D425/m-a-in-vietnam-s-banking-sector-forecast-to-see-big-changes-in-2019/