Hanoi (VNS/VNA) - Weak banks that are restructuringwill be the target of merger and acquisition (M&A) deals in the near futureas the Government is strongly promoting the restructuring of the country’sfinance and banking industry.

News portal vnbusiness.vn quotedYoshizawa Toshiki, board member at Orient Commercial Joint Stock Bank, assaying that M&A activities will increase sharply after the pandemic, ofwhich M&A in finance and banking in Vietnam will be better.

Currently, the Vietnamese Government has policies such asequitising State-owned enterprises and banks, and restructuring weak,undercapitalised and substandard banks. This is an opportunity for foreignorganisations to make investments. Japan’s medium-sized banks are alsoconsidering the financial market and M&A in Vietnam, Toshiki said.

Warrick Cleine, chairman and CEO of KPMG in Vietnam and Cambodia, quoted by vnbusiness.vn, also said M&Aactivities in the financial and banking sector slowed in the first ten monthsof 2022, but he expected the sector will be the target of M&A transactionsfrom 2023.

It is positive that many foreign investors are interested in the sector. Theyhave a certain confidence in the Vietnamese market and businesses, Warricksaid, adding many CEOs are also considering M&A as an important way forthem to change their business model more effectively.

A typical deal is that VPBank expects to sell 49% of FE Credit shares toJapan’s Sumitomo Mitsui Banking Corporation (SMBC). At the same time, VPBankhas increased the maximum foreign ownership ratio from 15% to 17.6% of chartercapital. Though the time to complete the capital sale plan has not beendisclosed, a representative of VPBank said it would be implemented between 2022and 2023.

Besides the bank share purchase of foreign investors, M&A activities amongdomestic enterprises are forecast to boom in 2023 under the Government’scompulsory plan of transferring weak banks next year.

Though no name has been officially announced, with the recent moves ofcommercial banks, it can be seen that a number of deals have almost beendecided, according to vnbusiness.vn.For example, Military Bank and Vietcombank might receive the compulsorytransfer of Ocean Commercial Bank (OCB) and CBBank, respectively, while DongABank and GP Bank might be transferred to HDBank and VPBank, respectively.

The M&A form of weak banks is completely different from previously.Accordingly, weak banks will be merged with big banks under theparent-subsidiary model. The transferred weak banks will operate in the form ofone-member limited liability banks where the parent bank is the owner of 100%of the charter capital.

The subsidiary banks have legal entities that are independent of the parentbanks, and do not carry out consolidation of financial statements with theparent banks. Besides, the subsidiary banks’ calculation of capitaladequacy ratios, dividend policy, profit distribution and provision of fundsare also independent from parent banks.

Tim Evans, CEO of HSBC Vietnam, quoted by vnbusiness.vn, saidM&A deals in the Vietnamese banking industry would be better in the nextfew years, with drivers coming from both foreign investors and domesticcommercial banks. The banking and finance sector in Vietnam is emerging as abright spot to attract the attention of large financial groups in the worldwhile Vietnamese banks also have the need to increase capital and seekstrategic partners to improve risk governance, operational efficiency,technology and digitalisation.

Financial analysts said the trend of digital transformation is increasinglystrong in the economy and businesses are accelerating the speed oftransformation. New business models are increasingly appearing to cause fiercercompetition. The change will affect the M&A trend in the financial andbanking markets./.