Bank equitization faces delay

Four major State-run commercial banks are seen going public later than scheduled, said Le Xuan Nghia, director of the State Bank of Vietnam's Development Strategy Department.
He told 70 EuroCham members and other participants at the Banking Equitization: Going Global" luncheon in HCMC on Tuesday that the initial public offerings (IPO) by these banks would be a little later than expected due to problems with finding strategic shareholders and sharing price.

The Bank for Foreign Trade of Vietnam (Vietcombank), the Bank for Investment and Development of Vietnam, the Industrial and Commercial Bank (Incombank) and the Mekong Delta Housing Development Bank earlier planned to launch IPOs by this October.

Tumbling blocks have also arisen as to selling shares to staff of these banks.

Nghia explained strategic investors considered the offered share prices too high. The Government has ruled prices for strategic investors are based on the average price at IPOs.
This rule might undergo change, Nghia said at the luncheon organized by the European Chamber of Commerce in Vietnam (EuroCham). Therefore, there will be share auctions for only strategic investors before the IPOs.

However, he pointed out selling shares to staff of the four banks as a complicated issue that remains to be solved. He said there had been heated discussions about the staff's interests regarding to the number of their working years and shares for them as well as the interests of staff at the parent companies and subsidiaries.
He acknowledged that all the "humanitarian" issues were a hard nut to crack.

The Government permits the price of shares for staff to be 60% of the price set at public auctions.

There is a plan to equitize the Bank for Agriculture and Rural Development from 2008 and this job should be done by 2009, he said.

Nghia said the Government wanted to improve corporate governance for the banking sector through the equitization of the State-run banks.

Nghia stressed that Vietnam was implementing its commitments to the World Trade Organization and that the bilateral trade agreement with the US, under which the financial market will be opened up to foreign investors.

The Government allows foreign banks with total assets of at least US$20bil to open branches in Vietnam, and those with US$10bil or more to establish 100% foreign-owned banks and joint ventures with local banks.

Nghia said there were now six applications for opening, 100% foreign-owned banks but around 33 applications for new local banks.

Source: VNE