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Banks brace for surge in M&A   2010-08-01 - VNS

A second-half surge in merger and acquisition activities is expected in the financial and banking sectors, local reports say.

Their prediction is based on the directive from the State Bank of Viet Nam asking small-scale banks to increase their charter capital from the current VND1 trillion (US$52.6 million) or VND1.5 trillion to VND3 trillion (US$157.9 million).

To abide by the Government Decree No 141 ND-CP, banks have already made plans to offer new shares to existing shareholders as well as their staff after receiving permission from the State Securities Commission, according to the Dau Tu (Investment) weekly.

They are also considering selling stakes to some strategic investors to meet their capital increase targets, the paper says.

And to do this, many of the banks are opting for the M&A mode.

M&A allows the purchase, sale and merger of different companies that can aid, finance, or help a company grow rapidly without having to create another business entity.

Mekong Bank typifies the trend. In spite of having the Maritime Bank and a group of major shareholders that hold 49 per cent of its total shares, the bank plans to call for new strategic shareholders to raise its charter capital to VND3 trillion by the year-end.

Tran Thi Thanh Thanh, chairwoman of the Mekong Bank Managing Board, said they would set aside 30 per cent of the additional charter capital (VND2 trillion) for new strategic shareholders at home and abroad.

At present, the bank is negotiating with partners to seek strategic shareholders suitable for its development plan, Thanh said.

The Gia Dinh Commercial Bank is also taking similar preparatory steps to augment its charter capital.

After Vietcombank and Vietcombank Investment Fund sold 19 per cent out of their 30 per cent stake they held in the GiaDinh Bank, the latter found a major strategic shareholder operates in the securities and fund management areas. The new strategic partner now holds a 22 per cent stake in Gia Dinh Bank.

A representative of Navibank said they were looking to attracting strategic partners at home and abroad to raise more capital to meet the Government’s legal capital requirements.

According to State Bank of Viet Nam Governor Nguyen Van Giau, there is no plan to extend the capital increase deadline.

The decree was issued in 2006 so the affected banks have had enough time to make necessary preparations to increase their legal capital by the end of this year, Giau said.

This is likely to give added momentum to M&A activities implemented by small banks during the second half of this year.

If banks are unable to raise their charter capital as required, they would be merged with others, or will have to sell part of their stocks to partners, said Tran Du Lich, a member of the National Advisory Council for Financial and Monetary Policies.

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