In a bid to comply with a central bank regulation on cross ownership, Vietcombank is planning to divest its entire stake in five units, including four banks and a finance company, Chairman Mr. Nghiem Xuan Thanh said.
The fourth-largest bank in Vietnam by assets expects to reap VND1 trillion ($44 million) from selling all of its 6.97 per cent in Military Bank and 8.2 per cent in Eximbank in early 2018, according the Mr. Thanh. It previously planned to retain stakes in these two banks, with Military Bank returning good dividends, and an Eximbank that it was “advised” to support during the restructuring process.
The bank earlier announced that it will offer 13.2 million shares or 4.3 per cent of Saigonbank at an initial price of VND12,550 ($0.55) each, and 6.6 million shares of the Cement Finance Company (CFC) at VND11,549 ($0.5) each at the upcoming auction on November 20.
The deals are expected to generate roughly VND242 billion ($10.7 million) for Vietcombank, while it also aims to offload its entire 5.07 per cent holding in the Orient Commercial Bank (OCB) in the time to come, the Chairman said.
Cross ownership was rampant in Vietnam’s banking system five years ago, presenting opportunities for vested interests and manipulation. To deal with the pressing phenomenon, the State Bank of Vietnam (SBV) issued Circular No. 36 in 2016, stipulating that a commercial bank can own stakes in at most two other credit institutions with less than 5 per cent of voting rights.
A recent draft law by the SBV, which revises the Law on Credit Institutions, is set to further crack down on the issue.
Cases of purchase, sale, or transfer of shares with a value of 1 per cent or more of a bank’s charter capital will require the SBV’s written approval before implementation, while the money to buy the shares must be proved legally and must not have been originated through loans, according to the draft law.
The draft law also stipulates that major shareholders and related persons must not own more than 5 per cent of the charter capital of another credit institution.
Many banks have delayed the withdrawal from other banks although the deadline was set for 2015, with Vietcombank itself having been required by the government to comply with the rules. With the benchmark VN-Index rising 32 per cent since the start of this year, together with strong rallies of banking shares and solid earnings, Vietcombank is expected to see no difficulties in divesting the shares.
Vietcombank saw its third quarter pre-tax profit rise 31 per cent year-on-year to VND2.68 trillion ($119 million), resulting in a pre-tax profit of VND7.9 trillion ($348 million) for the first nine months of the year, an increase of 25 per cent year-on-year and equivalent to 86 per cent of its annual plan.
The strong increase in Vietcombank’s pre-tax profit was attributed to healthy growth in financial services, core business activities, and other activities. It was able to keep its provision for credit losses stable at VND4.5 trillion ($198.2 million), nearly unchanged against the same period last year.
After the first three quarters, Vietcombank had total assets of VND898.5 trillion ($39.57 billion), mobilized capital of VND688 trillion ($30.3 billion), and total lending of VND536 trillion ($23.6 billion), with all figures increasing by between 14 and 16 per cent on an annual basis.
Its bad debts as at September 30 stood at 1.15 per cent, down from 1.51 per cent as at the end of 2016, thanks to a decline in sub-standard and potentially irrecoverable debts.
Source: VN Economic Times