Restructuring of some Vietnam banks likely to be taken up within this year

Restructuring plan for ailing banks from now till the end of this year is gradually revealed.

At a press conference late last week, representatives of the State Bank of Vietnam (SBV) officially confirmed that Global Petroleum Commercial Joint Stock Bank (GP.Bank), Nam Viet Commercial Joint Stock Bank (Navibank), Great Trust Commercial JS Bank (TrustBank) and Western Commercial Joint Stock Bank (Western Bank) are in the list of weak banks that have to restructure from now until the end of 2012.

The central bank said that these banks have to reorganize because of their weak liquidity position. Although according to the report of these banks, their bad debt ratio was only around 2%, according to an examination of the central bank’s inspectorate and independent auditing, the bad debt ratio of these banks is up to tens of percent, even up to 60 percent and losing chartered capital.

The central bank’s representative confirmed that these four banks have not come up the optimal restructuring plan, but they will have to re-structure in 2012. In addition, the central bank also said that it will submit to the government a scheme to establish the national debt trading company on November 15. These are the synchronous steps to speed up the process of bank restructuring.

According to the information from the local Newswire Bao Dau Tu (Vietnam Investment Review), in addition to these four banks in the restructuring list, a merger and acquisition (M&A) deal between the two banks in the South has been almost completed though these two banks are not included in the restructuring list. In addition, a number of other banks are actively learning from each other and encouraged by the central bank for merger and acquisition. Thus, from now until the end of the year, there will be a series of M&A deals in the banking sector.

Notably, although the central bank announced the name of these banks in the coming restructuring list, the market received information in a calm way because the roadmap for bank restructuring was given by the central bank earlier. Moreover, the SBV Governor has ensured not to let any banks collapse and create trust for people.

The common point of these four banks is very low information transparency. However, the restructuring plan of Western Bank and Navibank is partially clear.

Navibank organized its annual general meeting (AGM) 2012 earliest amongst these four banks. According the second quarter business results announced by the bank, the bank’s non-performing loan (NPL) ratio as of June 30 was 3.14%. Its after tax profit in the first six months of 2012 was 91.5 billion dong, down slightly from the same period in 2011.

Particularly, at the AGM held on June 3, Dang Thanh Tam, a permanent member of Navibank’s Board of directors said Navibank to use its internal resources, namely the undistributed profits to restructure, consolidate its assets and enhance financial capacity.

Nguyen Van Dung, SBV’s HCM City branch’s deputy director also confirmed the central bank allows Navibank to restructure themselves by its own resources and does not need to merge with other banks.

With Western Bank, the bank’s operations have potentially huge risks by sparing too much loans on internal shareholders and backyard companies. Western Bank’s audited consolidated financial statements in 2011 showed that, in 2011, the bank’s credit growth was up to 123.5%. However, its profit was relatively modest and the average return on equity (ROE) was only 4.84%.

About restructuring plan, analysts said that it is likely that Western Bank will merge with PetroVietnam Finance JS Corp (PVFC) as rumoured by the media recently. The western Bank’s restructuring plan can be made at the bank’s shareholders’ meeting, which is scheduled to take place in November or December.

Meanwhile, information about the restructuring of GP Bank and Trust Bank was very rare on the market. With GPBank, after seven years of establishment, GPBank still is a small-sized banks. There have not been information about the operation results as well as the structure of shareholders being made public, except the annual report in 2010. According to this report, the bank’s NPL ratio in 2010 was only 1.83%. However, due to non-transparent information, we cannot confirm if this is the correct data.

With TrustBank, its audited consolidated fiscal statement 2011 showed unsatisfactory figures with after tax profit of nearly 164 billion dong and bad debts from Group 3 to 5 were up to nearly 200 billion dong. The bank’s structure of shareholders as of December 31, 2011 included so many units such as Hung Vuong Insurance JSC (11%), Dai Viet Securities JSC (10.52%), Lam Giang Real Estate JSC (11%), Phu My Ltd Co (10%), Phu My JSC (9.5%) and Vietnam Gold Trading and Investment JSC (6%).

According to the analysts, with the current situation, GPBank and Trustbank will be difficult to be able to re-structure themselves, which will have to choose the plan of consolidation or merger with other banks.

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