Mergers and acquisitions (M&A) in the financial and banking sector will certainly thrive when Vietnam totally opens up its financial markets after 2010, a banking official has said.

The Chairman of the Board of Directors of the Vietnam Bank for Industry and Trade (Vietinbank), Pham Huy Hung, said that the State Bank of Vietnam demands that all joint stock commercial banks must have a chartered capital of at least 3 trillion VND by 2010 and this will put a lot of pressure on domestic credit organisations and encourage them to sell more shares to increase their chartered capital.

In addition, a number of foreign financial institutions are trying to penetrate Vietnam ’s financial market by placing their capital in local banks to aid their long-term development plans.

According to Hung, the involvement of big economic groups or organisations in the banking sector will also affect M&A. The strategic cooperation between the Vietnam National Oil and Gas Group and the Southeast Asia Bank; the Vietnam Navigation Group, the Vietnam Post and Telecommunications Group and the Vietnam Maritime Commercial Stock Bank; and FPT and MobiFone and the Tien Phong Bank is considered the beginning of many M&A.

Having noted that M&A are the quickest way to expand market share, Hung said that Vietinbank is choosing foreign strategic shareholders. The newly-equitised bank, which is listing on the southern stock exchange, has received a lot of attention from a number of the world’s big financial institutions, including the US-based Wells Fargo, France’s Banque Populaire, Germany’s Commerzbank and Japan’s Mizuho Bank.

Ten foreign banks have now entered into deals with local banks. HSBC holds 20 percent of Techcombank, Malaysia’s Maybank bought 15 percent of the An Binh Bank (ABBank) and Singapore’s Overseas Chinese Banking Corporation (OCBC) holds 15 percent of the Vietnam Commercial Bank for Private Enterprises (VP Bank).

In the meantime, a number of foreign banks are keen to up their ownership of Vietnam’s financial organisations as they see good long-term development prospects in the nation of 86 million people. The HSBC wants to increase its stake from 10 percent to 18 percent at the Bao Viet while Maybank wants to raise its stake from 15 percent to 20 percent.

Financial experts say that local banks should have good M&A strategies to increase their M&A operations to raise their competitiveness and expand their market share./.