SHB, HBB merger gets nod, bad debts sharply rise
By Truong Nam - The Saigon Times Daily
HANOI – The draft plan to merge Hanoi Building Commercial Bank (HBB) into Saigon-Hanoi Commercial Bank (SHB) has received approval from the majority of the two banks’ shareholders as well as the central bank’s green light. However, the deal once concluded will send the bad debt ratio of the merged lender up to nearly 13%.
The merger was given the consensus from over 99% of the total number of holders of voting shares from a total of 488 shareholders of SHB in its annual general meeting in Hanoi last Saturday. Similarly, HBB’s general meeting in Hanoi on April 28 saw up to 85.21% of its shareholders passing the scheme.
Nguyen Van Le, general director of SHB, confirmed to shareholders in the annual general meeting that the ratios of bad debts and overdue loans of the consolidated bank would stay at 12.88% and 21.32% respectively. Le attributed the high non-performing loan ratios to loans owed by the loss-making Vietnam Shipbuilding Industry Group (Vinashin).
Meanwhile, well-informed sources told the Daily that the merged bank would suffer a total accumulated loss of VND1.829 trillion.
Regarding financial solutions, Le said the bank planned to set aside risk provisions for Vinashin’s loans and its bonds within five years. The provisions will be VND372 billion for loans and VND72 billion for bonds of Vinashin per annum, Le clarified.
Notably, 30% of Vinashin’s outstanding balances and 30% of its bonds will be issued into Government-guaranteed bonds. The bonds later would be treated as collateral for the open market operation (OMO) to ‘mobilize low-cost capital for SHB’. And SHB will use the remaining outstanding balance as mortgages to receive recapitalization from the central bank with lending rates three percent lower than the normal level.
In line with the agreement on share swapping between the two banks, HBB shareholders will enjoy 0.75% of HBB’s VND4.050 trillion chartered capital as cited by SHB chairman Do Quang Hien. And the remaining 0.25% will be given to SHB shareholders, Hien stated.
In related news, the central bank has announced it supported the merger of HBB and SHB based on the voluntary desire of related sides.
The State Bank of Vietnam requested the two lenders to conform to Circular 04/2010/TT-NHNN issued by the governor relating to the credit institutions’ merger and acquisition activity. The authority, however, insisted that the merger not affect benefits of customers of the involved lenders, especially depositors.
“The decision to merge the two lenders is an optimal option to ensure the interests of both shareholders and investors of HBB appropriate for the target of the banking system restructuring of the Government and the central bank. The central bank thus will continue to support and create favorable conditions to make the deal successful,” the central bank stressed.