Banks facing pressure of rapid disinvestment

  • August 11, 2015

The State Bank of Vietnam’s (SBV) compulsory restructuring policy has put many commercial banks under pressure because they have to withdraw capital from investment projects within a short time.

Vietnam, Vietcombank, disinvestment, cross-ownership

A series of new regulations have been released recently by SBV in an effort to tighten control over commercial banks’ operation. Banks have been urged to promote merger and acquisition deals to reduce bad debt ratios to below 3 percent. Circular No 36 released in February stipulates that a commercial bank can hold no more than a 5 percent of stake in two other credit institutions, unless the “other credit institutions” are the bank’s subsidiaries. Many banks hold more than the allowed stake and they will have to fulfill the disinvestment within one year since the day the Circular No 36 took effect. Under the 2010 Credit Institution Law, individual shareholders must not hold more than 5 percent of chartered capital in a bank, while the total shares that they and their relatives hold must not be higher than 20 percent. Five banks still have individual shareholders holding more than 5 percent of chartered capital, five banks have institutional shareholders holding more than 15 percent, and eight banks have groups of shareholders holding more than 20 percent. Vietcombank now holds stake in five other banks and finance companies and hold more than 5 percent in four out of the five. This means that Vietcombank will have to withdraw capital from at least three credit institutions. The bank, for example, holds 8 percent of Saigonbank, while some sources said Saigonbank would be merged into Vietcombank in the time to come. Other sources said that Vietcombank wanted to admit Saigonbank, while the merger was put into discussion at the extraordinary shareholders’ meeting in late 2014. However, the HCM City Party Committee, a big shareholder of Saigonbank, did not agree on the deal. The sources also said Vietcombank, which holds 8 percent of Eximbank’s shares, is trying to withdraw capital from the bank. Opinions from well informed circles said Vietcombank is considering selling all of its Eximbank shares to Nam A Bank. Eximbank is also believed to withdraw capital from Sacombank. It held 9.7 percent of Sacombank shares after buying shares from ANZ in 2012. However, the stake ratio decreased to over 5 percent after the Southern Bank’s merger with Sacombank. Analysts commented that it would be very difficult to sell shares at expected prices in the current market conditions. M&A is the shortest route for banks to take to eliminate cross-ownership status. Maritime Bank, which holds 10 percent of shares in MDB, for example, will be “safe” if it admits MDB.

Source: VietNamNet

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