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Surge of M&A deals expected in Vietnam’s banking sector

The State Bank of Vietnam (SBV) continues to facilitate banks’ voluntary mergers and acquisitions (M&A), aiming to form larger financial institutions with better governance and stronger finance. This is part of a 2016-2020 credit institution restructuring associated with handling bad debts, approved by the government.


Opportunities

In 2018, HDBank began merging with PGBank, and the mergers are expected to be accomplished later this year. Meanwhile, BIDV sold 17.65 percent of its holdings to KEB Hana Bank from the Republic of Korea (RoK). In July 2019, BIDV issued a resolution approving documents of transactions with foreign strategic investors. Last year, Vietcombank sold 10 percent of its shares to raise its chartered capital. Early this year, Vietcombank successfully sold more than 111 million shares, equivalent to three percent of its chartered capital, to Singapore’s GIC Private Limited and Mizuho Bank Ltd. Vietcombank will sell another 6.5 percent of its shares from now to 2020.

Investors are interested in acquiring weak credit institutions in Vietnam. J Trust Group (Japan), for example, has applied to the State Bank of Vietnam for permission to acquire and restructure the CBBank.

The M&A demand in the banking sector keeps increasing, as restructuring and increasing capital to meet Basel II standards has always been a heavy pressure for credit institutions.

The project for restructuring banks, phase 2 (2016-2020) encourages mergers of small banks and credit institutions into larger facilities, and therefore offers many more opportunities for banks’ M&A.


M&A expected to be more exciting

According to State Bank of Vietnam Circular 41/2016/TT-NHNN, banks must maintain a minimum capital adequacy ratio of eight percent.

Dr. Bui Quang Tin from the Ho Chi Minh City Banking University’s Business Management Faculty said many banks have a capital adequacy ratio of less than eight percent and they don’t have much more time to increase capital and meet the Capital Adequacy Ratio (CAR) standard. This augurs a boost in banks’ M&A.

According to financial and banking expert Dr. Nguyen Tri Hieu, M&A in the banking sector will be very exciting, as a series of banks are seeking strategic partners, and the government is encouraging mergers of small banks into larger ones.

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