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It’s quite difficult to sell or buy banks at this moment
In order to buy or sell banks, it is necessary to find out the real value of the banks. Meanwhile, this proves to be a very difficult work in the current circumstances.
It’s necessary to look at the situation realistically
Thuan Nguyen, General Director of StoxPlus, the first thing that the State Bank of Vietnam needs to do in the bank restructuring process, is to instruct commercial banks to check their assets and have accurate assessment over their financial situation. “We will only know exactly about the financial situation and the actual capital of banks after finishing the checking,” he said.
A recent survey on bank structure conducted by StoxPlus quoted the State Bank’s report as saying that the bad debt ratio of the banking system had reached 3.1 percent of the total outstanding loans by June 30, 2011, or 4 billion dollars. However, with a series of insolvency cases on the black credit market, the non-performing loans (NPL) have surely increased sharply.
According to the central bank, 12 percent of the total outstanding loans, or 12 billion dollars, have been poured into the real estate and securities sectors. If troubles occur on the two markets, the NPL ratio will surely increase.
Though many banks now have the standard CAR (capital adequacy ratio) at over 8 percent, but the CAR prove to be very different for different banks. However, the ratios may decrease quickly if banks properly enter in accounts the provisions against NPL.
A director of a securities company, which is now giving advices to some bank purchase deals, said that the reported NPL ratio does not truly reflect the current situation.
“I know a lot of companies have issued bonds to banks to get money to pay bank debts. If they do not do this, banks will have to consider the debts as the bad debts,” he said, adding that this is just a trick played by banks and borrowers in order to “beautify figures.”
Also according the securities company’s director, it also happens that a bank lends money to A company, so that A re-lends to B company which then uses the money to pay bank debt.
“The debts of the real estate sector remains an unknown,” he said.
What laws to follow?
Analysts say that the unclear legal framework for M&A (merger and acquisition) should also be cited as one of the reasons that make it difficult to conduct M&A deals.
A director of an investment fund management company said that the regulations relating to M&A activities now can be found in six different laws, including the Competition Law, Investment Law, Enterprise Law, Securities Law, the Law on Credit Institutions and the Law on the State Bank, and many other legal documents.
The report on M&A deals made in 2011 released by StoxPlus quoted the analysis of Indochine, a consultancy firm, as saying that complicated procedures need to be followed by involved parties before getting approval from competent agencies.
In other countries, the approval of state agencies is needed to prevent monopoly or protect some “sensitive business fields.” Meanwhile, in Vietnam, the approval first aims to recognize the legitimacy of the transactions. In some cases, the deal may be refused, and if so, all the great efforts made by involved parties may become in vain.
Meanwhile, Vietnam does not pay much attention to the purposes of fighting against monopoly and protecting consumers in M&A deals.
Foreign banks are considered potential buyers for domestic banks. However, experts say that the ceiling in foreign ownership ratio in domestic banks (20 percent of stakes) would be an obstacle that keeps foreign investors away. This means that M&A deals will rely on domestic companies, while the companies, with limited financial capability, will not have much money to buy the things they want.
vietnamnet, TBKTSG
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