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Mergers, consolidations, acquisitions – Inevitable trends of Vietnamese commercial banks in the development process
Posted date 21/04/2016
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Posted date 21/04/2016
7.454 view
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In the context of increasingly deep international economic integration, the financial market in general and banking in particular in Vietnam are growing stronger and affirming their role in the development of the country's economy. The emergence of a series of banks in recent years shows the strong attraction of this potential financial sector.
Dr. Le Thi Xuan - Head of Faculty of Finance and Accounting
In the context of increasingly deep international economic integration, the financial market in general and banking in particular in Vietnam are growing stronger and affirming their role in the development of the country's economy. The emergence of a series of banks in recent years shows the strong attraction of this potential financial sector. However, the Vietnamese banking system is facing great challenges when the country's economic situation is facing many difficulties. The weaknesses of the banking system that have accumulated over a long period of time have become evident, the number of commercial banks has exploded and banking competition is increasingly fierce, making bank mergers and acquisitions (M&A) an inevitable trend.
1. Summary of merger, consolidation and acquisition (M&A) activities of Vietnamese commercial banks
+ Period 1991-2005
After 1991, a series of joint stock commercial banks were established and operated in Vietnam. 1997 was the year with the highest number of commercial banks with 84 banks. Due to the difficulties of a young economy and the strong impact of the 1997 financial and monetary crisis that caused many banks to fall into difficulty, the State Bank was under pressure to consolidate and focus on building a strong banking system. Therefore, the State Bank implemented a strategy to rectify joint stock credit institutions, and there were about 10 rural joint stock banks that were consolidated by dissolution, license revocation, and merger with large urban banks. Specifically:
- Hanoi International Bank acquired Mekong Joint Stock Commercial Bank.
- Phuong Nam Joint Stock Commercial Bank merged with Chau Phu Joint Stock Commercial Bank (An Giang), Dinh Cong People's Credit Fund (Thanh Tri - Hanoi), Dai Nam Joint Stock Commercial Bank, Dong A Joint Stock Commercial Bank acquired Long Xuyen Quadrangle Joint Stock Commercial Bank.
- Thuong Tin Commercial Joint Stock Bank merged with Thanh Thang - Can Tho Commercial Joint Stock Bank.
- Tay Do Joint Stock Commercial Bank merged into Phuong Dong Joint Stock Commercial Bank in 2003, increasing the charter capital of Phuong Dong Joint Stock Commercial Bank to 101 billion VND.
Thus, the merger of Vietnamese banks in this period was mainly due to the State Bank's designation of merging a number of joint stock commercial banks to restructure the banking organization to be more effective. In addition, there was also the reason of self-awareness of the joint stock commercial banks merging to improve their competitiveness with the 4 state-owned commercial banks.
+ Period 2005-2011
Marking the beginning of M&A activities in Vietnam was the promulgation of the 2005 Enterprise Law by the State, in which the concepts of M&A were first recognized in Vietnamese law, creating a solid legal basis for future activities. However, the deals during this period were mainly due to domestic banks selling shares to financial groups, foreign investment funds and some other strategic shareholders.
Table 1: Some typical bank M&A cases in the period 2005-2011 1. Summary of merger, consolidation and acquisition (M&A) activities of Vietnamese commercial banks
+ Period 1991-2005
After 1991, a series of joint stock commercial banks were established and operated in Vietnam. 1997 was the year with the highest number of commercial banks with 84 banks. Due to the difficulties of a young economy and the strong impact of the 1997 financial and monetary crisis that caused many banks to fall into difficulty, the State Bank was under pressure to consolidate and focus on building a strong banking system. Therefore, the State Bank implemented a strategy to rectify joint stock credit institutions, and there were about 10 rural joint stock banks that were consolidated by dissolution, license revocation, and merger with large urban banks. Specifically:
- Hanoi International Bank acquired Mekong Joint Stock Commercial Bank.
- Phuong Nam Joint Stock Commercial Bank merged with Chau Phu Joint Stock Commercial Bank (An Giang), Dinh Cong People's Credit Fund (Thanh Tri - Hanoi), Dai Nam Joint Stock Commercial Bank, Dong A Joint Stock Commercial Bank acquired Long Xuyen Quadrangle Joint Stock Commercial Bank.
- Thuong Tin Commercial Joint Stock Bank merged with Thanh Thang - Can Tho Commercial Joint Stock Bank.
- Tay Do Joint Stock Commercial Bank merged into Phuong Dong Joint Stock Commercial Bank in 2003, increasing the charter capital of Phuong Dong Joint Stock Commercial Bank to 101 billion VND.
Thus, the merger of Vietnamese banks in this period was mainly due to the State Bank's designation of merging a number of joint stock commercial banks to restructure the banking organization to be more effective. In addition, there was also the reason of self-awareness of the joint stock commercial banks merging to improve their competitiveness with the 4 state-owned commercial banks.
+ Period 2005-2011
Marking the beginning of M&A activities in Vietnam was the promulgation of the 2005 Enterprise Law by the State, in which the concepts of M&A were first recognized in Vietnamese law, creating a solid legal basis for future activities. However, the deals during this period were mainly due to domestic banks selling shares to financial groups, foreign investment funds and some other strategic shareholders.
| STT | Seller | Buyer | Ownership ratio |
| VPBank | OCBC | 15% | |
| ABbank | MayBank | 15% | |
| Techcombank | HSBC | 20% | |
| Eximbank | Sumito Mitsui Banking corporation (SMBC) | 15% | |
| VOE Investors buy 5%, Mirate Asset Exim 5% | 5% | ||
| Investment limited (MAE) belongs to Mirate Asset Group, Korea | 4.5% | ||
| Mirate Asset Maps opportunity Vn equity balanced fund (OVEBF) | 0.5% | ||
| Habubank | ANZ | 10% | |
| IFC & Dragon Financial holding | 15% | ||
| Sacombank | Deutsche Bank | 10% | |
| Seabank | Societe Generale | 15% | |
| Vietinbank | IFC | 10% | |
| Vietcombank | Mizuho | 15% | |
| VIB | Commonwealth Bank | 20% |
Source: Self-synthesized through newspapers
Table 1 shows that in 2011, banking was one of the industries with the most active M&A activities. With the participation of a number of investment funds and foreign banks, a number of Vietnamese banks successfully bought and sold their shares, helping to increase business capital and improve management and technology application, typically:
- Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) sold to Mizuho 15% of its capital calculated based on the number of issued and outstanding shares. This investment is equivalent to 567.3 million USD, equivalent to 11,800 billion VND, the largest ever in mergers and acquisitions (M&A) activities in Vietnam.
- IFC's purchase of 10% of VietinBank shares with a total value of up to 182 million USD is a typical deal marking the purchase of shares by foreign strategic investors in Vietnamese banks and is also the largest share issuance deal of the year.
- Commonwealth Bank of Australia has purchased an additional 25 million shares of Vietnam International Bank (VIB) at a price of up to VND45,000/share; thereby increasing its holding ratio from 15% to 20%.
In addition, there are other typical M&A deals such as between Standard Chartered and ACB, Hong Kong and Shanghai Banking Corporation (HSBC) and Techcombank, OCBC and VPBank, Deutsche Bank and Habubank, Singapore Bank (UOB) and Southern Commercial Joint Stock Bank (PNB) or Maybank and ABBank...
Characteristics of M&A banking activities in Vietnam during this period:
- There is no complete M&A deal, just buying a certain percentage of shares, stopping at the level of cooperation, support, and strategic shareholders.
- The driving force of M&A deals is an internal process, not designated by the State Bank or any competent authority. Instead of seeking to counter the risk of being acquired, banks proactively seek M&A partners to survive.
+ Phase 2012 -2015
M&A activities in commercial banks during this period were quite active, mainly within the State Bank's mandatory restructuring program to ensure the safety of the credit institution system and stabilize the monetary market. In 2012 and 2013, 9 small commercial banks were included in the program to carry out mandatory restructuring through various measures such as consolidation (SCB, Ficombank, Tinnghiabank), merger (Habubank into SHB), and self-restructuring (Tienphongbank, Trustbank, Navibank, Westernbank and GP bank).
2012 marked some notable mergers, including:
Merging 3 banks SCB, Ficombank and Vietnam Tin Nghia Bank : On January 1, 2012, Saigon Commercial Joint Stock Bank - The merged bank with charter capital of 10,000 billion VND, total assets of 150,000 billion VND, and more than 200 branches and transaction offices officially came into operation after merging from 3 banks: Saigon Commercial Joint Stock Bank (SCB), First Bank (Ficombank) and Vietnam Tin Nghia Bank. This is a voluntary merger under the auspices of the Bank for Investment and Development of Vietnam (BIDV), and the support of the State Bank through a refinancing loan.
If before the merger, the three banks mentioned above were in a state of serious illiquidity, according to the State Bank, after 1 year of restructuring, SCB has made positive progress, significantly improving its liquidity and financial capacity through solutions to increase charter capital, call for capital from foreign investors, consolidate the value of collateral, promote debt settlement and mobilize capital from the economy. SCB increased by 35.9% in 2012 and increased by 7% in the first 2 months of 2013. Thanks to that, SCB has ensured the safety of State assets, paid normally to partners with people's deposits and paid off most of the refinancing loans of the State Bank.
Merging Habubank into SHB : On August 28, 2012, Hanoi Building Commercial Joint Stock Bank (Habubank) officially merged into Saigon - Hanoi Commercial Joint Stock Bank (SHB). For Habubank, loans and bond investments associated with Vietnam Shipbuilding Industry Group (Vinashin) were identified as the biggest burden leading to difficulties in considering the merger. Habubank's bad debt ratio before the merger was 23.66% (equivalent to VND 3,729 billion). After the merger, the new SHB bank will have a capital adequacy ratio (CAR) of 11.39%, meeting international standards (Habubank's previous CAR was just over 4%).
In addition, the market also recorded the following activities: TienPhongBank sold shares to DOJI Group with a maximum holding ratio of 20%, Postal Savings Service Company - a company under VNPost - was merged into Lien Viet Bank and this bank changed its name to Lien Viet Post Bank...
According to experts, the restructuring of banks has achieved initial results after 1 year of implementation. Notably, the safety of the credit institution system has been significantly improved; the risk of system collapse has been gradually pushed back; State and people's assets have been ensured; people's deposits have been paid normally, even at weak banks. Weak credit institutions at risk of collapse have been strictly controlled by the State Bank and gradually handled with appropriate solutions, thereby gradually stabilizing the monetary market.
2013 continued with a number of notable deals:
- Started with the deal of VietinBank signing a contract to sell 20% of shares to Japanese Bank Tokyo Mitsubishi UFJ - investment value up to 743 million USD
- The deal between IFC and Maybank with ABBank: IFC becomes a major shareholder of ABBank with a 10% ownership ratio and Maybank continues to own 20% of the charter capital. With this deal, ABBank's charter capital increased from nearly 4,200 billion VND to nearly 4,800 billion VND.
- The merger of WesternBank and PVFC into the Public Commercial Joint Stock Bank (PVcomBank) with a charter capital of 9,000 billion VND
- The merger of DaiABank and HD Bank into HD Bank with charter capital increased from 5,000 billion VND to 8,100 billion VND.
In 2015, there were 3 M&A deals , namely:
On May 22, 2015, Mekong Delta Housing Development Joint Stock Commercial Bank (MHB) officially completed the merger with BIDV. On the same day, May 22, 2015, Vietinbank and PG Bank also signed the merger documents of PG Bank into Vietinbank. On August 12, 2015, Mekong Development Joint Stock Commercial Bank (MDB) officially merged into Maritime Bank.
In addition, to ensure the stability of the monetary market, the State Bank has also decided to buy back 3 weak commercial banks at the price of 0 VND, namely Global Petroleum Joint Stock Bank (G.PBank), Ocean Bank (Oceanbank) and Construction Bank (VNCB). The State Bank also converted the operating model of 2 banks VNCB and OceanBank into one-member limited liability banks. This restructuring solution has never been applied before, bringing the total number of weak banks handled to 12 in the past 3 years, not to mention a series of other financial companies that have also been massively merged in recent times. Currently, public opinion is quite interested and waiting for other deals that have been rumored by the market throughout the first half of 2015 but have not yet come true, such as: Vietcombank - SaigonBank; Eximbank - Nam A Bank; DongA Bank - ABBank .
2. Evaluation of benefits achieved by commercial banks after merger and consolidation
- Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) sold to Mizuho 15% of its capital calculated based on the number of issued and outstanding shares. This investment is equivalent to 567.3 million USD, equivalent to 11,800 billion VND, the largest ever in mergers and acquisitions (M&A) activities in Vietnam.
- IFC's purchase of 10% of VietinBank shares with a total value of up to 182 million USD is a typical deal marking the purchase of shares by foreign strategic investors in Vietnamese banks and is also the largest share issuance deal of the year.
- Commonwealth Bank of Australia has purchased an additional 25 million shares of Vietnam International Bank (VIB) at a price of up to VND45,000/share; thereby increasing its holding ratio from 15% to 20%.
In addition, there are other typical M&A deals such as between Standard Chartered and ACB, Hong Kong and Shanghai Banking Corporation (HSBC) and Techcombank, OCBC and VPBank, Deutsche Bank and Habubank, Singapore Bank (UOB) and Southern Commercial Joint Stock Bank (PNB) or Maybank and ABBank...
Characteristics of M&A banking activities in Vietnam during this period:
- There is no complete M&A deal, just buying a certain percentage of shares, stopping at the level of cooperation, support, and strategic shareholders.
- The driving force of M&A deals is an internal process, not designated by the State Bank or any competent authority. Instead of seeking to counter the risk of being acquired, banks proactively seek M&A partners to survive.
+ Phase 2012 -2015
M&A activities in commercial banks during this period were quite active, mainly within the State Bank's mandatory restructuring program to ensure the safety of the credit institution system and stabilize the monetary market. In 2012 and 2013, 9 small commercial banks were included in the program to carry out mandatory restructuring through various measures such as consolidation (SCB, Ficombank, Tinnghiabank), merger (Habubank into SHB), and self-restructuring (Tienphongbank, Trustbank, Navibank, Westernbank and GP bank).
2012 marked some notable mergers, including:
Merging 3 banks SCB, Ficombank and Vietnam Tin Nghia Bank : On January 1, 2012, Saigon Commercial Joint Stock Bank - The merged bank with charter capital of 10,000 billion VND, total assets of 150,000 billion VND, and more than 200 branches and transaction offices officially came into operation after merging from 3 banks: Saigon Commercial Joint Stock Bank (SCB), First Bank (Ficombank) and Vietnam Tin Nghia Bank. This is a voluntary merger under the auspices of the Bank for Investment and Development of Vietnam (BIDV), and the support of the State Bank through a refinancing loan.
If before the merger, the three banks mentioned above were in a state of serious illiquidity, according to the State Bank, after 1 year of restructuring, SCB has made positive progress, significantly improving its liquidity and financial capacity through solutions to increase charter capital, call for capital from foreign investors, consolidate the value of collateral, promote debt settlement and mobilize capital from the economy. SCB increased by 35.9% in 2012 and increased by 7% in the first 2 months of 2013. Thanks to that, SCB has ensured the safety of State assets, paid normally to partners with people's deposits and paid off most of the refinancing loans of the State Bank.
Merging Habubank into SHB : On August 28, 2012, Hanoi Building Commercial Joint Stock Bank (Habubank) officially merged into Saigon - Hanoi Commercial Joint Stock Bank (SHB). For Habubank, loans and bond investments associated with Vietnam Shipbuilding Industry Group (Vinashin) were identified as the biggest burden leading to difficulties in considering the merger. Habubank's bad debt ratio before the merger was 23.66% (equivalent to VND 3,729 billion). After the merger, the new SHB bank will have a capital adequacy ratio (CAR) of 11.39%, meeting international standards (Habubank's previous CAR was just over 4%).
In addition, the market also recorded the following activities: TienPhongBank sold shares to DOJI Group with a maximum holding ratio of 20%, Postal Savings Service Company - a company under VNPost - was merged into Lien Viet Bank and this bank changed its name to Lien Viet Post Bank...
According to experts, the restructuring of banks has achieved initial results after 1 year of implementation. Notably, the safety of the credit institution system has been significantly improved; the risk of system collapse has been gradually pushed back; State and people's assets have been ensured; people's deposits have been paid normally, even at weak banks. Weak credit institutions at risk of collapse have been strictly controlled by the State Bank and gradually handled with appropriate solutions, thereby gradually stabilizing the monetary market.
2013 continued with a number of notable deals:
- Started with the deal of VietinBank signing a contract to sell 20% of shares to Japanese Bank Tokyo Mitsubishi UFJ - investment value up to 743 million USD
- The deal between IFC and Maybank with ABBank: IFC becomes a major shareholder of ABBank with a 10% ownership ratio and Maybank continues to own 20% of the charter capital. With this deal, ABBank's charter capital increased from nearly 4,200 billion VND to nearly 4,800 billion VND.
- The merger of WesternBank and PVFC into the Public Commercial Joint Stock Bank (PVcomBank) with a charter capital of 9,000 billion VND
- The merger of DaiABank and HD Bank into HD Bank with charter capital increased from 5,000 billion VND to 8,100 billion VND.
In 2015, there were 3 M&A deals , namely:
On May 22, 2015, Mekong Delta Housing Development Joint Stock Commercial Bank (MHB) officially completed the merger with BIDV. On the same day, May 22, 2015, Vietinbank and PG Bank also signed the merger documents of PG Bank into Vietinbank. On August 12, 2015, Mekong Development Joint Stock Commercial Bank (MDB) officially merged into Maritime Bank.
In addition, to ensure the stability of the monetary market, the State Bank has also decided to buy back 3 weak commercial banks at the price of 0 VND, namely Global Petroleum Joint Stock Bank (G.PBank), Ocean Bank (Oceanbank) and Construction Bank (VNCB). The State Bank also converted the operating model of 2 banks VNCB and OceanBank into one-member limited liability banks. This restructuring solution has never been applied before, bringing the total number of weak banks handled to 12 in the past 3 years, not to mention a series of other financial companies that have also been massively merged in recent times. Currently, public opinion is quite interested and waiting for other deals that have been rumored by the market throughout the first half of 2015 but have not yet come true, such as: Vietcombank - SaigonBank; Eximbank - Nam A Bank; DongA Bank - ABBank .
2. Evaluation of benefits achieved by commercial banks after merger and consolidation
M&A has brought great value to both sellers and buyers and is especially useful when banks fall into recession due to competitive pressure or market changes... The biggest benefits include:
Firstly, increase capital and assets, expand network and branch operations.
After M&A, banks have the opportunity to increase their capital scale and expand their network of operations. The merger of 3 banks SCB, TinNghiaBank and FicomBank into SCB has increased SCB's charter capital 2.5 times from 4 trillion to more than 10 trillion VND, helping the "new" SCB rise to 5th place in terms of charter capital scale, only behind EximBank, VietinBank, VietcomBank, BIDV and Agribank.
The merger of Habubank into SHB has increased SHB's total assets by 28% from VND80,985 billion to VND103,785 billion (equivalent to the size of banks in the G14 group) and SHB's charter capital has nearly doubled to VND8,865 billion, narrowing the gap with leading joint stock commercial banks. On the other hand, by taking over 90 transaction points, branches, and savings funds of Habubank, the number of SHB's branches and transaction offices has increased by one and a half times, from 141 branches and transaction offices to 211 branches and transaction offices.
After the merger, Lien Viet Bank became one of the banks with the largest network in the country, much larger than the 60 transaction points nationwide before the merger because the partner itself - Postal Savings Service Company (VPSC) had the largest network in the country with more than 10,000 transaction points at post offices.
Similarly, the sale of shares to foreign investors also significantly increased the total charter capital of Vietnamese banks. After 2 transactions of selling shares to strategic partners, Vietinbank's charter capital increased to 32,661 billion VND, making VietinBank the commercial bank with the largest charter capital and the strongest shareholder structure in Vietnam... Or Through the merger with PG Bank, VietinBank will be able to use the licenses of 16 branches and 63 transaction offices and PG Bank's network savings fund to consolidate its strategy of capturing domestic market share to increase competitive advantage. This combination will create a VietinBank network of more than 7,000 transaction points, providing dense banking services across the country, covering even remote provinces and villages and communes. This special factor will contribute to increasing VietinBank's competitive advantage compared to Agribank and Lien Viet Post Bank, making VietinBank the bank with the second largest transaction network nationwide.
After the merger with MHB, the charter capital increased from 28,112 billion to 31,481 billion, BIDV's total assets increased from 655,000 billion to 695,000 billion VND, ranking fourth in the domestic commercial banking system in terms of total assets. The distribution channel network increased from 760 transaction points to nearly 1,000 points nationwide, with a total workforce of nearly 24,000 employees.
Or with MDB, after the merger, Maritime Bank's charter capital will increase to nearly 11,800 billion VND, total assets will be 113,000 billion VND. The number of branches and transaction offices will increase from 221 to nearly 300, putting the Bank in the top 5 in terms of network, top 3 in terms of charter capital among joint stock commercial banks...
Second, it helps post-merger banks save costs, creating opportunities to increase operational efficiency.
With M&A, instead of building branches and transaction offices from scratch with a lot of costs for establishment, construction, system expansion, and distribution network deployment, banks can immediately take advantage of the existing network and human resources of their partners. This not only saves costs but also helps to minimize the time to penetrate the market.
Mergers also help banks after the merger reduce office rental costs, employee salary costs, branch and transaction office operating costs by taking advantage of business scale, by cutting branches and transaction offices of banks that previously had the same operating area to maintain as one branch, by cutting redundant personnel, etc. Reduced costs mean increased revenue, which is a factor that will make the operations of the bank after the merger and acquisition more efficient.
Third, increase customer base
In addition to increasing the number of transaction points, mergers and acquisitions also increase the customer base by taking advantage of each other's customer systems. Because each bank has its own business characteristics that are suitable for its inherent potential, when combined, there will be separate advantages to exploit and complement each other. As for share purchase transactions, the increase in the number of customers is not only the result of simple addition from the partners' customers but also thanks to taking advantage of the synergy and the increase in the bank's position in the market.
For example, after merging with Habubank, the number of individual customers at SHB increased by 9,611; the number of institutional customers increased by 182; the number of individual accounts increased by 115,592 and the number of economic organizations increased by 2,713.
It is expected that after the merger with GP Bank, VietinBank will be able to access the customer base not only of GP Bank and Petrolimex but also of some member companies of Petrolimex such as PJICO Non-Life Insurance Company, the 4th largest non-life insurance company in the Vietnamese market. It is estimated that the total number of customers can reach 15 million.
Fourth, taking advantage of each other's high-quality human resources, increasing investment opportunities, and enhancing the position of banks after the merger.
M&A has contributed to enhancing the position of banks after merger, not only domestically but also internationally, especially in M&A with large companies or banks, mergers and acquisitions with foreign elements because domestic commercial banks can take advantage of capital, technology and management capacity as well as business opportunities abroad, especially in the current conditions of limited financial capacity, business capacity and management experience of Vietnamese commercial banks. For example:
After the merger, in 2014, by taking advantage of market opportunities, restructuring the investment portfolio and focusing mainly on investing in government bonds, SCB was one of the 10 members with the largest market share in the government bond market according to the ranking of the Hanoi Stock Exchange - HNX. This helped SCB improve its position in the market, increase the proportion of liquid assets and profitable assets, thereby improving the quality of the balance sheet.
Or with IFC holding 10% or Mitsubishi Tokyo UFJ holding 20% of shares, VietinBank's position has increased significantly in the eyes of investors: On December 28, 2012, the prestigious rating company Standard & Poor's increased VietinBank's long-term issuer credit rating from B+ to BB- with a "stable" outlook. S&P also increased VietinBank's long-term rating in the ASEAN region from "axBB" to "axBB+". VietinBank's short-term issuer credit rating remains at B. At the same time, VietinBank's high-priority unsecured bonds were also upgraded from B+ to BB-. Similarly, on November 16, 2012, S&P also upgraded EximBank's credit rating to B+ with a stable outlook, with the view that EximBank will benefit from the cooperation with a foreign strategic shareholder holding 15% of capital, Sumitomo Mitsui Banking Corp.
Thus, to survive, compete and develop, M&A is an inevitable trend because Vietnamese commercial banks after M&A have opened a new development cycle. M&A has brought Vietnamese commercial banks greater added value than when these banks stood alone thanks to achieving economic benefits on a larger scale, increasing prestige, brand, reducing costs, maximizing business advantages of participating parties, developing customer base, distribution network... thereby contributing to strengthening position, competitiveness in the market and improving business efficiency for banks. /.
References
1. Nguyen Thi Loan, 2011, M&A activities of Vietnamese commercial banks - current situation and solutions. Industry-level topic, code KNH 2010-03
2. Nguyen Ngoc Ly (2013) M&A in Vietnamese banks – Issues arising from the merger of Saigon – De Nhat – Tin Nghia Commercial Joint Stock Bank, Science and Technology magazine 105 (05).
3. Tran Thi Thu Huong - Nguyen Bich Ngoc (Market - Finance - Currency Magazine No. 9.5.2014)
4. Nguyen Huy Khanh (2014) restructuring Vietnamese commercial banks with M&A activities, corporate finance No. 06 (131) – 2014
5. Proceedings of the scientific workshop “Financial management for Vietnamese commercial banks after merger – current situation and solutions”, Bach Khoa Publishing House, Hanoi 2016
6. Some WebsitesFirstly, increase capital and assets, expand network and branch operations.
After M&A, banks have the opportunity to increase their capital scale and expand their network of operations. The merger of 3 banks SCB, TinNghiaBank and FicomBank into SCB has increased SCB's charter capital 2.5 times from 4 trillion to more than 10 trillion VND, helping the "new" SCB rise to 5th place in terms of charter capital scale, only behind EximBank, VietinBank, VietcomBank, BIDV and Agribank.
The merger of Habubank into SHB has increased SHB's total assets by 28% from VND80,985 billion to VND103,785 billion (equivalent to the size of banks in the G14 group) and SHB's charter capital has nearly doubled to VND8,865 billion, narrowing the gap with leading joint stock commercial banks. On the other hand, by taking over 90 transaction points, branches, and savings funds of Habubank, the number of SHB's branches and transaction offices has increased by one and a half times, from 141 branches and transaction offices to 211 branches and transaction offices.
After the merger, Lien Viet Bank became one of the banks with the largest network in the country, much larger than the 60 transaction points nationwide before the merger because the partner itself - Postal Savings Service Company (VPSC) had the largest network in the country with more than 10,000 transaction points at post offices.
Similarly, the sale of shares to foreign investors also significantly increased the total charter capital of Vietnamese banks. After 2 transactions of selling shares to strategic partners, Vietinbank's charter capital increased to 32,661 billion VND, making VietinBank the commercial bank with the largest charter capital and the strongest shareholder structure in Vietnam... Or Through the merger with PG Bank, VietinBank will be able to use the licenses of 16 branches and 63 transaction offices and PG Bank's network savings fund to consolidate its strategy of capturing domestic market share to increase competitive advantage. This combination will create a VietinBank network of more than 7,000 transaction points, providing dense banking services across the country, covering even remote provinces and villages and communes. This special factor will contribute to increasing VietinBank's competitive advantage compared to Agribank and Lien Viet Post Bank, making VietinBank the bank with the second largest transaction network nationwide.
After the merger with MHB, the charter capital increased from 28,112 billion to 31,481 billion, BIDV's total assets increased from 655,000 billion to 695,000 billion VND, ranking fourth in the domestic commercial banking system in terms of total assets. The distribution channel network increased from 760 transaction points to nearly 1,000 points nationwide, with a total workforce of nearly 24,000 employees.
Or with MDB, after the merger, Maritime Bank's charter capital will increase to nearly 11,800 billion VND, total assets will be 113,000 billion VND. The number of branches and transaction offices will increase from 221 to nearly 300, putting the Bank in the top 5 in terms of network, top 3 in terms of charter capital among joint stock commercial banks...
Second, it helps post-merger banks save costs, creating opportunities to increase operational efficiency.
With M&A, instead of building branches and transaction offices from scratch with a lot of costs for establishment, construction, system expansion, and distribution network deployment, banks can immediately take advantage of the existing network and human resources of their partners. This not only saves costs but also helps to minimize the time to penetrate the market.
Mergers also help banks after the merger reduce office rental costs, employee salary costs, branch and transaction office operating costs by taking advantage of business scale, by cutting branches and transaction offices of banks that previously had the same operating area to maintain as one branch, by cutting redundant personnel, etc. Reduced costs mean increased revenue, which is a factor that will make the operations of the bank after the merger and acquisition more efficient.
Third, increase customer base
In addition to increasing the number of transaction points, mergers and acquisitions also increase the customer base by taking advantage of each other's customer systems. Because each bank has its own business characteristics that are suitable for its inherent potential, when combined, there will be separate advantages to exploit and complement each other. As for share purchase transactions, the increase in the number of customers is not only the result of simple addition from the partners' customers but also thanks to taking advantage of the synergy and the increase in the bank's position in the market.
For example, after merging with Habubank, the number of individual customers at SHB increased by 9,611; the number of institutional customers increased by 182; the number of individual accounts increased by 115,592 and the number of economic organizations increased by 2,713.
It is expected that after the merger with GP Bank, VietinBank will be able to access the customer base not only of GP Bank and Petrolimex but also of some member companies of Petrolimex such as PJICO Non-Life Insurance Company, the 4th largest non-life insurance company in the Vietnamese market. It is estimated that the total number of customers can reach 15 million.
Fourth, taking advantage of each other's high-quality human resources, increasing investment opportunities, and enhancing the position of banks after the merger.
M&A has contributed to enhancing the position of banks after merger, not only domestically but also internationally, especially in M&A with large companies or banks, mergers and acquisitions with foreign elements because domestic commercial banks can take advantage of capital, technology and management capacity as well as business opportunities abroad, especially in the current conditions of limited financial capacity, business capacity and management experience of Vietnamese commercial banks. For example:
After the merger, in 2014, by taking advantage of market opportunities, restructuring the investment portfolio and focusing mainly on investing in government bonds, SCB was one of the 10 members with the largest market share in the government bond market according to the ranking of the Hanoi Stock Exchange - HNX. This helped SCB improve its position in the market, increase the proportion of liquid assets and profitable assets, thereby improving the quality of the balance sheet.
Or with IFC holding 10% or Mitsubishi Tokyo UFJ holding 20% of shares, VietinBank's position has increased significantly in the eyes of investors: On December 28, 2012, the prestigious rating company Standard & Poor's increased VietinBank's long-term issuer credit rating from B+ to BB- with a "stable" outlook. S&P also increased VietinBank's long-term rating in the ASEAN region from "axBB" to "axBB+". VietinBank's short-term issuer credit rating remains at B. At the same time, VietinBank's high-priority unsecured bonds were also upgraded from B+ to BB-. Similarly, on November 16, 2012, S&P also upgraded EximBank's credit rating to B+ with a stable outlook, with the view that EximBank will benefit from the cooperation with a foreign strategic shareholder holding 15% of capital, Sumitomo Mitsui Banking Corp.
Thus, to survive, compete and develop, M&A is an inevitable trend because Vietnamese commercial banks after M&A have opened a new development cycle. M&A has brought Vietnamese commercial banks greater added value than when these banks stood alone thanks to achieving economic benefits on a larger scale, increasing prestige, brand, reducing costs, maximizing business advantages of participating parties, developing customer base, distribution network... thereby contributing to strengthening position, competitiveness in the market and improving business efficiency for banks. /.
References
1. Nguyen Thi Loan, 2011, M&A activities of Vietnamese commercial banks - current situation and solutions. Industry-level topic, code KNH 2010-03
2. Nguyen Ngoc Ly (2013) M&A in Vietnamese banks – Issues arising from the merger of Saigon – De Nhat – Tin Nghia Commercial Joint Stock Bank, Science and Technology magazine 105 (05).
3. Tran Thi Thu Huong - Nguyen Bich Ngoc (Market - Finance - Currency Magazine No. 9.5.2014)
4. Nguyen Huy Khanh (2014) restructuring Vietnamese commercial banks with M&A activities, corporate finance No. 06 (131) – 2014
5. Proceedings of the scientific workshop “Financial management for Vietnamese commercial banks after merger – current situation and solutions”, Bach Khoa Publishing House, Hanoi 2016
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