BIDV merger in the bag

11:46 | 24/04/2015
The merger between BIDV, the country’s second largest bank in terms of assets, and the unlisted Mekong Housing Bank will be completed this May, with the share conversion fixed at 1:1, BIDV’s leaders confirmed during the bank’s AGM held in Hanoi last week.

 

For the financial year of 2015, BIDV set its target deposit growth at 16.5  per cent, credit growth at 16 per cent, pre-tax profit at VND7.5 trillion ($35.05 million), bad debts ratio at around 2.5 per cent and dividend payout ratio at 9 per cent.

Meanwhile, BIDV’s chartered capital is currently reported at VND28.112 trillion ($1.31 billion), eight times its merging partner’s VND3.369 trillion ($157.42 million).  BIDV’s assets in 2014 were also 14.5 times bigger than MHB’s.

Given its massive scale and financial means, BIDV’s credit and deposit lines are also greater than MHB’s. The giant lender’s earning per share (EPS) last year reached almost VND1,400 (7 UScents) while MHB attained a smaller VND400 (2 UScents).

The share conversion rate of 1:1 is therefore causing concenrs to BIDV shareholders’ and investors’ alike, given the big differences between the two banks.

However, according to Ha, both banks have been partially owned by the state and the nature of the merger can be written down as a simple transfer of state ownership from one bank to another. 

“Once merged, BIDV’s market share price will not be worsened, but get better, in my opinion. As for MHB, its share price has been edging up on the over-the-counter (OTC) market, too,” BIDV chairman Tran Bac Ha stated. 

According to MHB’s 2014 financial reports given by its board of management, the bank had 2.72 per cent bad debts and attained a VND162 billion ($7.57 million) in pre-tax profit and a VND353 trillion ($16.5 million) in net profit before credit risk and bad debts provisions last year.

In 2014, MHB’s credit marched vigorously up to 13.8 per cent and the bank’s total outstanding debts reached as high as VND30.605 trillion ($1.43 billion). MHB credit lines focused chiefly on the agricultural and fishery sectors and their processing and supporting industries.

BIDV, according to Ha, would be promoting rural and agricultural credit lines, particularly in the Mekong Delta area. In recent years, the bank has also strengthened its credit lending in the technologically intensive fields of cattle breeding and in the application of higher technology in cultivation. 

Merging with MHB would then help extend BIDV’s reach in lending activities towards the agricultural sector and strengthen the bank’s credit lending capacity.  

During the AGM, BIDV also proposed its shareholders to approve a plan of establishing a consumer finance company. “The consumer finance company will assist BIDV’s goal towards becoming a leading modern retail bank in Vietnam in the coming time. The bank has prioritied its retail banking line and this is our strategic objective for sustainable development,” BIDV said.

By By Nguyen Trang

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