Small banks merging into bigger banks is becoming a growing trend in Vietnam.The State Bank of Vietnam (SBV) said it wants to reduce the number of commercial banks by half after three years, according to an article published on the English language news website VietNamNet Bridge on April 16.

A senior official of the State Bank of Vietnam said more merger and acquisition (M&A) deals will be announced in the near future.

PG Bank’s board of management is going to submit the bank’s restructuring plan to the shareholders’ meeting, slated for April 18, under which the bank would merge into another big bank. A source from the bank said “VietinBank has shown its goodwill for cooperation.”

VietinBank is one of the biggest commercial banks in Vietnam, and one in which the State holds the controlling stakes.

If the suggested plan on merging into VietinBank gets approval from shareholders, PG Bank would become a subsidiary of VietinBank. Meanwhile, PG Bank’s apparatus, brand name and operation would be retained. As such, once the deal is completed, PG Bank would become “a bank in a bank.”

However, VietinBank has not released any information about the deal.

Some days ago, Southern Bank’s shareholders discussed the bank’s board of management’s proposal on merging into Sacombank. Meanwhile, the Mekong Development Bank (MDB) is reportedly seeking permission to merge into Maritime Bank.

MDB, which has chartered capital of 3.75 trillion VND, and Maritime Bank, with chartered capital of 8 trillion VND, have reportedly fulfilled 50 percent of the milestones needed for the merger. It is expected that the deal will be completed by July.

Thoi bao Kinh Te Saigon has quoted its sources as saying that the State Bank of Vietnam has agreed in principle to the merger plans submitted by Southern Bank and Sacombank, and MDB and Maritime Bank.

A report of the Ban Viet Securities Company released on April 11 revealed that Vietcombank is considering the possibility of admitting a small bank. The bank’s board of management is consulting with its shareholders about the plan at the shareholder’s meeting to be held on April 23. However, it is still unclear which bank Vietcombank is targeting.

The above said senior official of the SBV said instead of buying weak banks’ shares to recover them, the watchdog agency now tends to encourage big banks to admit small banks to restructure them.

The official said the new solution can help speed up the banking system restructuring process because it allows for saving on costs and time. What the SBV needs to do is to create best conditions for commercial banks to fulfill the procedures after their shareholders’ agree on the M&A plans.

SBV Governor Nguyen Van Binh, at the government’s regular meeting in late March, said that after the first nine banks are successfully restructured, another 6-7 banks will also undergo restructuring through M&A.

The central bank kicked off the bank restructuring process in late 2011 when it realised that there were many weak banks which needed reshuffling.

Several successful M&A deals have been completed so far, including Tin Nghia-De Nhat-SCB, Habubank-SHB, and Western Bank-PVFC.-VNA