Sumitomo Mitsui-invested VPBank plans to merge with ailing lender

Hanoi-based VPBank, the biggest private lender by charter capital in Vietnam, will ask for shareholders’ approval to proceed with a plan to acquire a weak bank following a request by the State Bank of Vietnam (SBV).

Documents released ahead of its AGM on April 29 said the bank to be taken over should have a charter capital of less than VND5 trillion ($196.5 million), while its total assets as well as owner’s equity should not surpass 5% of VPBank’s corresponding figures.

The target ailing bank will operate as a single-member limited liability company, owned by VPBank.

VPBank will also trade assets, debts, and corporate bonds with the target bank to realize the takeover plan approved by government authorities, with values exceeding 20% of VPBank’s charter capital.

VPBank raised its charter capital to VND79,339 billion ($3.12 billion) after selling a 15% stake to Japan’s Sumitomo Mitsui Banking Corporation (SMBC) last year, from VND67,434 billion at end-2022.

The State Bank of Vietnam has identified four weak banks pending forced takeover: CBBank, OceanBank, GPBank, and DongABank. All have been placed under special surveillance to prevent contagion risks.

VPBank did not mention the name of the bank that it plans to take over. However, market rumors have it that VPBank will acquire Hanoi-based GPBank, which stands for Global Petro Sole Member Limited Commercial Bank.

Performance targets

VPBank aims to earn a before-tax profit of VND23,165 billion ($910.22 million) this year, soaring 114% from 2023.

Its total assets are set to increase 19% year-on-year to VND974,270 billion ($38.28 billion). Deposits are targeted to rise 22% to VND598,864 billion, and outstanding loans are set to grow 25% to VND752,104 billion.

The bank also plans to spend VND7,934 billion ($311.78 million) on a cash dividend of 10% for 2023. This will be the second straight year the lender has paid a cash dividend.

It will ask for shareholders’ permission to issue up to $400 billion worth of international sustainable five-year bonds. The issuance is scheduled for this year or Q1/2025. The proceeds will be used to provide loans to projects meeting the bank’s green criteria.