M&A wave in banking sector expected in 2012

ietNamNet Bridge – Only 2/3 of the total current banks would still exist, while the number of joint stock commercial banks would decrease to less than 30 banks. Vietnam expects to see a strong merger and acquisition M&A wave in 2012.

Only 2/3 of banks would exist

Saigon Bank, the bank generated by the merger of the three banks, has officially become operational since January 1, 2012. The smooth merger of the banks, which did not cause any chaos and big changes on the market, has kicked off the process of restructuring Vietnamese banks.

Prior to that, Governor of the State bank of Vietnam Nguyen Van Binh stated that Vietnam would deal with all the weak banks in 2012, while revealing that the number of weak banks accounts for 5 percent of the total joint stock banks.

Therefore, analysts have every reason to believe that the M&A market would be very bustling in 2012.

Banking experts have predicted that the next M&A deals would be made public after the 9-day long Tet holiday, by the end of January 2012. The names of 5-6 banks which have big bad debt ratios and low business effectiveness have been mentioned these days, which people believe would be the subjects for M&A deals in the time to come.

“M&A activities would go strongly in 2012. I know a lot of banks are seeking suitable partners to merge. The number of domestic banks would decrease, and only 2/3 of the current 37 banks would still exist,” said Nguyen Tri Hieu, a banking expert.

Sharing the same view, representatives of foreign bank branches in Vietnam have also predicted that a lot of merger deals would take place in the time to come, in which the banks with big bad debt ratio would be swallowed.

Louis Taylor, General Director of Standard Chartered Vietnam said he believes the number of Vietnamese banks would decrease in 2012 as the result of the restructuring process. However, he affirmed that eliminating weak banks is a necessary move to increase the number of strong banks.

Private economic sector to join bank restructuring

The State Bank has determined to restructure the banking system, but it always emphasizes that the process must go in a cautious and safe way, which does not cause any chaos to the national economy. This explains why the deal of merging three banks to form up Saigon Bank has been backed by the State, represented by the state owned bank BIDV.

However, analysts believe that a lot of M&A deals in the banking system would still occur in 2012 without the intervention of state owned banks.

Governor of the State Bank of Vietnam Nguyen Van Binh has several times affirmed that Vietnam would call for the private economic sector to join the restructuring process in order to minimize the cost of the restructuring.

“With the current method (encouraging banks merge into each other), I believe that we will not have to spend too much money to restructure banks,” said Vu Viet Ngoan, Chair of the National Finance Supervision Council.

Ngoan said that credit institutions all have provisioned against risks, and with the current resources, the restructuring is within reach.

Experts believe that the participation of the private economic sector in the restructuring would not only help reduce costs, but also help reduce risks for state owned banks.

Nguyen Thi Mui, a well known economist, said that it is not advisable to let one state owned bank to come forward and take the responsibility of supporting in liquidity to too many other banks, because this may cause risks to the whole banking system, while the problem would not be settled to the every roots.

Source: SGTT