Vietnam Daily News

Merger and acquisition in banking industry expected to 'boom'

Written by Dailynews.vn Saturday, 10 December 2011 19:16

Merger and acquisition in Vietnam's banking industry is expected to "boom" from now until 2015. It is considered as a golden opportunity for foreign banks to take to gain market share in Vietnam.

Speaking at the Consultative Group of donors for Vietnam on December 6, the State Bank of Vietnam (SBV) Governor Nguyen Van Binh said the State Bank is developing the detailed plans for reducing weak banks with the least costs. This showed that the State Bank is very supportive of M&A or consolidation among banks.

Many economists forecast, after the first "shots" of the merger of three banks TinNghia Bank, Saigon Commercial Bank and Ficombank, from now until 2015, M&A activities in the banking sector will be extremely exciting. This is an opportunity not only for local banks, but also for other foreign banks.

At Vietnam Business Forum (VBF) held in Hanoi recently, Louis Taylor, Head of Banking Working Group cum CEO of Standard Chartered Vietnam once again proposed to increase the foreign holding ration in local banks.

Louis Taylor said that this will create better conditions for foreign banks to participate in the restructuring of banks in Vietnam, and allow local banks and other strategic partners to make specific and long-term business plans.

Meanwhile, Sumit Dutta, CEO of HSBC Vietnam also said that M&A is a good solution for the restructuring of banks in Vietnam to prevent collapses. HSBC also said that the State Bank should create more opportunities for foreign banks to participate in the restructuring of banks in Vietnam.

Representatives of companies from Europe, Alan Cany, Chair of European Chamber of Commerce (Eurocham) also said that a lot of banks in Europe are interested in buying stake in Vietnamese banks. "Due to not working very well in Europe in the current conditions, many banks in Germany, Switzerland or France is seeking opportunities in emerging markets. I believe that the current debt crisis in Europe, in certain aspects, will be the opportunities for the economy as well as the banking sector of Vietnam," said Alan Cany.

Dr Nguyen Duc Kien, vice Chair of the National Assembly Economic Committee said that Vietnam is still a very potential market in terms of financial and monetary. The country has about 100 credit institutions, but they are concentrating the most in HCM City and Hanoi. Most of the value-added services of banks do not reach farmers, workers and poor people yet. Thus, opportunities for investors in the banking sector are still huge.

Currently, the State Bank has a provision specifying the holding ratio of foreign banks for domestic banks (up to 15 percent). However, according to Dr Nguyen Duc Kien, in fact, opportunities for foreign banks are very open, even more open than what investors demand. "When a foreign bank invests in a local bank with a certain percentage, it will be involved as a board member of the bank, or it may together direct M&A of local banks. Thus, in some ways Vietnam's monetary policies have created relatively open conditions for foreign investors," Kien said.

In this regard, Latifah Merican Cheong, Advisor to the Chair's Office, Malaysia Securities Commission, who has had rich experiences in bank restructuring, said: "Besides the opening, Malaysia also improved the capacity of domestic banks so that when the market opened, locally there is already a group of domestic banks that are willing to lend to prioritised sectors and can help ensure the banking system's liquidity when the crisis may happen".

Source: www.intellasia.net/news/articles/finance/111350319.shtml