Vietnamese commercial banks are in a hurry to divest capital in other peers and meet the regulation of limiting cross holding set by the SBV.
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On November 12, state-run Vietnam Bank for Agriculture and Rural Development (Agribank) said it would auction 468,000 shares the bank is holding in Orient Commercial Bank (OCB).
At the starting price of VND18,130 (US$0.78), Agribank is expected to book proceeds of at least VND8.5 billion (US$364,280).
Additionally, Agribank is focusing on divesting capital from non-core businesses, which is part of the lender’s business strategy in the 2016 – 2020 period. Since 2014, Agribank has raised over VND1 trillion (US$42.86 million) by divesting capital from seven companies.
At the annual general meeting in 2018, Nghiem Xuan Thanh, Vietcombank's chairman, informed the bank's intention of divesting capital in other banks where Vietcombank holds more than 5% stake, including Military Bank (MB) with 6.97% stake or 150.6 million shares and Vietnam Export Import Commercial Bank (Eximbank) 8.24% or 101.2 million shares.
On September 21, Vietcombank announced its decision to offload 45.6 million shares in Eximbank. At the starting price of VND14,497 (US$0.62) apiece, Vietcombank is expected to book proceeds of at least VND661 billion (US$28.35 million).
Similarly, the bank will auction its holding of 53.4 million shares in MB on October 15, expecting a return of VND1.04 trillion (US$44.52 million) for the offering price of VND19,641 (US$0.84) per share.
Once completing the two mentioned deals, Vietcombank would reduce its holding in the two banks in subject below 5% and no longer be major shareholder in both banks.
Vietcombank previously divested its shares in a number of credit institutions, including SaigonBank, Cement Finance Company (CFC) and entire shareholding in Orient Commercial Bank (OCB) on September 6.
Another major state-run Joint Stock Commercial Bank for Foreign Trade of Vietnam (VietinBank) also planned to put its entire shareholding in Saigon Bank for Industry and Trade (Saigonbank) for auction, announced the former on October 4.
Under the plan, VietinBank will auction over 15 million Saigonbank shares or 4.91% of the latter's charter capital at an undisclosed price, while the timing for auction has also not been announced publicly.
In 2016, VietinBank sold 17 million shares or 5.48% stake in Saigonbank with starting price of VND10,800 (US$0.46) apiece, reducing its holding to the current 4.91%.
According to experts, banks have found it easier to offload banking shares thanks to better business performance following a faster-growing economy, dwindling bad debts, and the uptrend of the local stock market.
Deadline is nearing
Under the regulation, commercial banks are permitted to hold shares in a maximum of two other credit institutions, with the stake in each not exceeding 5%. The SBV requires banks to comply with its requirements before June 30 next year.
After six years, cross-ownership in Vietnamese banking system has significantly declined, as direct cross-ownership has fallen from seven pairs six years ago to one pair currently, said SBV Governor Le Minh Hung in a recent hearing held by the National Assembly.
Ownership of direct shares between banks and companies also decreased, from 56 pairs six years ago to two pairs, while a stakeholder's ownership in excess of 15% of chartered capital decreased to one bank compared with 19 banks six years ago.
According to Hung, the central bank has been stepping up effort in dealing with cross-ownership, however, as sales depend on finding partners, the divestment period should be carefully calculated to preserve capital.
The SBV is expected to end the cross-ownership in the banking system by 2020, Hung added.
