M&As set to drive banking market

M&As set to drive banking market

The banking industry may see more merger and acquisition deals in the coming time, with more foreign partners involved.

Ernst & Young last week announced its annual Banking in Emerging Markets Survey covering 11 markets, which revealed the opinions of 17 banks in Vietnam, including one joint venture, two wholly-foreign-invested banks, three state-owned banks and 11 joint stock banks.

Some 60 per cent of respondents believed that the banking landscape over the next year would be driven by the acquisition of smaller banks by larger domestic banks.

Some 30 per cent believed the banking industry would be driven by foreign banks not currently present in the market, and 10 per cent thought that foreign banks already present in the market would provide momentum.

In terms of foreign competition, Japanese and European banks were highlighted as the greatest rivals.

Nine of 17 surveyed banks saw Japanese banks as competitors, because at least three Japanese banks have become strategic partners in Vietnamese banks, including Mizuho (holding 15 per cent in Vietcombank), Tokyo-Mitsubishi UFJ (holding 20 per cent in Vietinbank), and Sumitomo Mitsui Bank (holding 15 per cent in Eximbank).

However, Ernst & Young financial services senior partner Keith Pogson disagreed, “I don’t agree with this view, because in the coming years, the Vietnamese market will develop strongly in terms of retail, while Japanese banks don’t have much of an advantage in this sector. I think competitors to Vietnam’s banks will come from ASEAN.”

In fact, according to the survey, only 13 per cent of respondents said their main competitors would come from neighbouring nations and China.

Malaysian banks also backed this opinion, with 66 per cent of those surveyed stating that banks from ASEAN were a key source of competition, and none viewed Japanese banks as rivals.

Meanwhile, eight surveyed banks saw European banks as competitors, citing European banks operating in Vietnam like Germany’s Deutsche Bank, BHF - Bank Aktiengesellschaft, Unicredit Bank AG and Landesbank Baden-Wuerttemberg, the UK’s Standard & Chartered and HSBC and France’s Natixis Banque BFCE, and Belgium’s Fortis Bank and Austria’s RBI.

Pogson said more mergers and acquisitions (M&A) between private banks would be seen in Vietnam.

“M&A would be a good move. When banks become bigger and stronger, their operations will become more stable and they will be able to invest in new technology and offer better services to customers,” he said.

He said the State Bank was allowing the sale of weak banks to stronger commercial joint stock or state-owned banks or foreign strategic partners. The State Bank was also encouraging local banks to consolidate.

For example, Sacombank recently asked the State Bank to allow it to merge with Southern Bank this year. If the deal is successfully concluded, it would enable Sacombank to expand its branches from 416 to 558 nationwide, and to increase its total assets by 48 per cent.

In another case, PG Bank is planning to find a partner to raise operational effectiveness, with Vietinbank rumoured to be in the picture.

Vietnam currently has 37 commercial joint stock banks, five wholly-foreign locally incorporated banks and four joint venture banks. The State Bank has planned to reduce the number of locally-owned banks to 15-17 in the coming years.

vir