Three possible trends for bank restructuring: newspaper

With the first bank merger successfully carried out earlier this month, Sai Gon Tiep Thi newspaper analyzes three possible trends for other changes to be made under the State Bank of Vietnam’s restructuring plan.
On December 6, Ficombank, TinNghiaBank and Saigon Commercial Bank (SCB) became the first three banks to be merged, as the central bank began to implement its banking reform plan.

The successful merger will lay the ground for the State Bank of Vietnam to fortify their plan on restructuring the banking system next year, which would likely unfold one of the following three possible scenarios.

First, banks that have the same owners and are governed by the same major shareholders can merge with each other to become one single bank.

One typical example for this is the case of Nam Viet Bank and Western Bank, both of which have most of their stakes held by Dang Thanh Tam, either directly or indirectly via the Saigon Invest Group, which Tam is chairing.

Second, small banks whose controlling interest held by a larger bank or the board members of a larger bank will tend to merge with that large bank to solve the liquidity problem.

For instance, Asia Commerce Bank is currently the majority shareholder of certain banks such as Kien Long Bank, Dai A Bank and VietBank.

In the last scenario, small banks will be acquired by other credit institutions that assume their controlling interests. These outsiders will restructure the banks’ operation, pumping more capital to help them overcome difficulties and have healthier operation.

To do this, banks will increase their capital by issuing stakes for new shareholders, which has been observed in the case of Gia Dinh Bank, which has recently been renamed Ban Viet Bank.

Meanwhile, majority shareholders of such banks can also divest and sell their stakes to outside holders.

This last trend is likely to be strong in the next five years, as many state-run enterprises are asked to divest from non-core businesses, including the finance and banking sectors, to concentrate on their core sectors.

Examples for this trend are the Petrolimex Bank, whose 40 percent stake held by the state-run fuel wholesaler Petrolimex; the Ocean Bank, where PetroVietnam holds a 20 percent stake; An Binh Bank, with 24 percent shares held by the Vietnam Electricity Group (EVN); and Saigon Hanoi Bank, where both of the Vietnam National Coal and Mineral Industries Group and the Vietnam National Rubber Corporation hold a 15 percent stake.

In related news, the newly bank that emerged from the merger of SCB, Ficombank, and TinNghiaBank yesterday told investors in Ho Chi Minh City that they will fund three major real-estate projects in the city -- the Times Square, Royal Garden, and the Saigon Peninsula projects, all located at the prime positions of the city.

Of these, the $125-million Times Square project is now seeing its decoration completed, and expected to reach completion by 2012, while construction of the other two is in the preparation process.

Le Hoang Chau, chairman of the HCMC Real Estate Association, said the newly-merged bank is the projects’ largest sponsor.

Doctor Lee George Lam, chairman of Macquarie Capital Indochina and chairman of the consultant board of the three banks, promised that he will assist the new bank.