Bustling M&A deals in banking industry at year beginning

Last week, the Board of Directors of the Vietnam National Petroleum Group (Petrolimex) approved a plan to divest capital from PG Bank, which means the bank will have a chance to seek a new strategic shareholder to increase its capital after 12 years.

Earlier in January, the Sumitomo Mitsui Banking Corporation (SMBC) was likely to complete capital divestment from Eximbank. Meanwhile, VPBank is working to sell 15% of its stake to a foreign partner. Once the deal finishes, it will be one of the banks with largest equity in the system.

In a directive issued earlier this year, the State Bank of Vietnam (SBV) no longer banned banks from paying cash dividends. Accordingly, this year, many banks are preparing to pay cash dividends such as VPBank, TPBank, VIB and ACB.

In its Directive 01/CT-NHNN, the SBV also encouraged banks to pay cash dividends in shares to increase charter capital, improve financial capacity and credit supply to the economy, and stabilise market interest rates.

Currently, VPBank is leading the system in terms of charter capital with over VND67 trillion ($2.84 billion). However, the ranking is likely to change with many new records to be set after the capital-raising race this year.

VPBank’s first rival will be Vietcombank, which plans to issue over 2.7 billion shares to increase its charter capital to VND75 trillion ($3.2 billion), becoming the leader in Vietnam’s banking industry in terms of chartered capital.

In recent years, Vietnamese commercial banks have actively increased their capital and improved their financial capacity, but compared to their peers in the region, the capital buffer of Vietnamese banks is still thin. On the other hand, while countries in the region have applied Basel 3 or a part of Basel 3 standards, Vietnam has just met Basel 2 standards.

According to experts, the upcoming increase in charter capital is crucial for banks in developing healthily, expanding business activities, and increasing resilience in a volatile economy.

Chairman of BIDV’s Board of Directors Phan Duc Tu said that by the fourth quarter of 2022, the capital adequacy ratio (CAR) of the Big 4 group was only 9.04%, while that of the joint stock commercial banks was 12.92%. This level is very low compared to other countries in the region, he said, citing the ratio of the Philippines was 16.29%; Singapore 17.2%; Malaysia 18.3%; Thailand 19.3%; and Indonesia 23.3%).