New banks to be born

The number of applications for establishing new banks now on the table of the Governor of the State Bank of Vietnam has reached 20. The well-informed circle says that the central bank will give answers on the applications in October.

Big general corporations are all making capital contributions to set up banks, despite the worries about unmarketable shares, which have prompted Vietcombank, MHB and Incombank to delay their IPO plans. Investors think that banking, together with securities and real estate are the most profitable business fields nowadays

All big general corporations, from oil and gas, electricity to textiles and garments have been named as the founding shareholders of new banks. The biggest names among the shareholders are Bao Viet (insurers), Vietnam National Post and Telecommunications (VNPT), PetroVietnam (oil and gas), Vinatex (textile and garment), Song Da Corporation (construction), VSC (steel), Habeco (brewery).

Corporations are also seeking ways to become the strategic shareholders of existing banks. More than 10 general corporations have become strategic partners of the Export-Import Bank (Eximbank).

Vinatex, for example, has together with BIDV (bank), Vincom (real estate developer) and Vinashin (shipbuilder), applied to set up the Industrial Development Bank (IDB). At the same time, Vinatex has made capital contributions to Nam Viet Bank, Maritime Bank, ACB and Eximbank.

Euro Window, a well-known name in the field of interior decoration, is also seeking permission to establish Euro Window bank. Meanwhile, Euro Window has got a licence from the State Securities Commission to set up a securities company.

The central bank’s committee for appraising investment projects and licencing banks was set up at the end of July. The committee will consider the applications based on the set requirements.

It is expected that the bank to receive the first licence this year will be Dong Duong Tin Phat. Its application for setting up a bank was submitted to the central bank six months ago and has gotten approval in principle.

The candidate which lodged its application first was Lien Viet bank.

Experts said that a new bank would be set up by the end of this year at the latest. Meanwhile, officials from the State Bank of Vietnam are keeping quiet about this, leaving the financial market to make wild guesses about the newcomers who will join the market in some days.

No new bank has been set up in the last 10 years. Meanwhile, arguments have been raised on whether to establish more banks and how many banks would be enough for Vietnam.

There are only 34 operational joint stock banks in Vietnam, and according to experts the figure is too small if compared to the number of banks in Singapore or Taiwan. Meanwhile, others say that one should not compare Vietnam with Singapore, the regional financial centre in Southeast Asia.

In fact, bank share prices have been decreasing dramatically: blue chips prices have decreased by 30-50% in the last four months. “The fact that a series of banks are awaiting to be established worries me. I wonder if they know how to run a bank,” an investor said. The investor does not understand why people are rushing to set up banks when bank shares are not attractive in the eyes of investors any more.

However, some other experts have said that the bank share price decrease is just a temporary problem, while setting up banks is a long-term plan. Bank share prices should not serve as the basis for investors to decide whether to set up banks.

The director of an investment fund said that capital was not the worrying problem; the headache now was the labour force. “While existing banks cannot find qualified managers, where will new banks find managers?” he asked.

Source: VNE