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Investors bail out ahead of bank merger
Many investors have opted to divest from Habubank (HBB) and Sai Gon-Ha Noi Bank (SHB) over the last two days for fear of losing capital in the process of the two banks' merger, details of which were officially confirmed in a press conference on Thursday.
The merger, when complete, will be the first between two listed banks on the nation's stock exchanges. Many shareholders are selling out of both banks despite calculations released by the banks showing that all shareholders would benefit from the merger.
The share swap ratio was set so that three-quarters of one SHB share can be swapped for one HBB share. Meanwhile, each SHB shareholder would be able to receive an additional 0.21 of one SHB share for each one share he/she is already holding. Shareholders would benefit from the merger because the market price of an HBB share was about 20 per cent below that of an SHB share.
Despite these reassurances, traders exchanged over 16.3 million HBB shares on August 8-10 at a ceiling price of VND5,100 per share, while over 7.3 million SHB shares changed hands during the priod at an average price of VND9,200. By the end of trades yesterday, SHB shares had declined 3.2 per cent while that of HBB remained flat.
"We have to pay attention to the prospect of a technical adjustment after the merger," said Thang Long Securities Co deputy director Quach Manh Hao. "More SHB shares will be listed after the merger, and if the technical adjustment takes place, the price of SHB will be lower."
A total of 405 million HBB shares will be delisted from the Ha Noi exchange on August 17, and the two banks will complete their share swaps by August 28. New shares will be listed beginning September 20.
With regard to investor concerns about the possibility of a lower swap ratio by the time the merger is carried out, Hao said such a possibility was unlikely as the details have been publicly announced.
After the merger, SHB's charter capital will rise to nearly VND9 trillion ($428.6 million), and the bank will have assets of VND120 trillion ($5.7 billion).
In July, global credit rating agency Moody's degraded SHB's credit outlook to negative, which reflected the agency's view on the continued uncertainties surrounding the merger.
SHB chairman Do Quang Hien said the bad debt ratio of HBB currently stood at 23.6 per cent of the bank's total debts, for a total of VND3.73 trillion ($177.6 million). This included debts owned by troubled State-owned shipbuilder Vinashin. After the merger with SHB, the bad debt ratio will fall to 8.69 per cent.
"The capital adequacy ratio of SHB after the merger will be 11.39 per cent, including HBB's bad debts, which is safe according to international standards," said Hien. He predicted that SHB would perform normally this year and that Moody's would change its view in the near future.
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