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VPBank's strategy to revitalise 'zero-dong bank'
At its recent AGM on April 29, questions were posed about VPBank's engagement in the restructuring of financially distressed banks, often referred to as 'zero-dong bank'.
VPBank chairman Ngo Chi Dung said, "The financial and managerial capacities required to partake in the restructuring of zero-dong banks are substantial. These banks are significantly burdened by accumulated losses and continue to incur deficits. Generally, most banks are reluctant to engage in such restructuring due to the financial outlook."
"However, VPBank's situation is distinct due to our robust backing from Sumitomo Mitsui Banking Corporation, enhancing our capital foundation. Growth in scale is pivotal to our strategy. While the immediate financial gains from participating in restructuring may be limited, the long-term benefits are considerable," Dung continued.
"Firstly, it facilitates credit expansion, which is crucial for our strategic growth, allowing us to exceed the industry's average credit growth rates," he said. "Secondly, it increases our room for foreign investments. The current cap is set at 30 per cent for foreign holdings, but there is significant interest from foreign investors in VPBank. Expanding this limit would substantially enlarge our capital base," he added. "Furthermore, our strategic and policy frameworks are well-aligned and compelling. Participating in restructuring not only promises to enhance the stability of Vietnam's banking system but also leverages our capabilities to make impactful changes."
Previously, VPBank outlined its intention to undertake a compulsory acquisition of a struggling financial institution.
The institution in question, as per VPBank's disclosure, represents no more than 5 per cent of VPBank’s total assets and owner's equity as of the end of 2023, with its charter capital not exceeding VND5 trillion ($208 million).
Post-acquisition, this entity is set to operate as a wholly owned, one-member limited liability bank under VPBank's ownership.
Besides VPBank, it was noted that other banks, such as MB, are also signalling their plans to acquire and restructure zero-dong banks.
Following this, another shareholder queried about the bank's performance in the bancassurance sector.
CEO of VPBank Nguyen Duc Vinh said, "Bancassurance has faced challenges over the past year due to stringent regulations, yet it continues to hold significant potential. VPBank is collaborating with AIA and several non-life insurance companies. Although we anticipate steady revenue from AIA in 2024, the non-life insurance segment, particularly through our partnership with OPES, is poised for growth, promising to bring additional revenue to VPBank in the coming period."
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