Investors and shareholders have been left surprised with corporations and businesses divesting from commercial banks at a starting price higher than the market price. With this move, banks too remain worried as once these big businesses divest then banks will no longer receive any incentives.
Trading unstable
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On 1 March, the Vietnam National Oil and Gas Group (Petrolimex) issued a notice concerning the State Securities Commission (SSC) granting a certificate of public offering of 120 million shares held by the Petrolimex Petroleum Joint Stock Commercial Bank (PGB) for public auction at the Ho Chi Minh Stock Exchange (HoSE). These shares are equivalent to 40 percent of PGB, at a starting price of VND 21,300, equivalent to a total value of VND 2,556 bln. Compared to the market price of PGB of VND 17,000 this starting price is 25 percent higher. However, soon after the information was released to the public, PGB made an impressive increase in price and is currently trading at around VND 21,000, equivalent to the starting price offer on 7 April.
PGB is one of the banks whose charter capital has remained unchanged for many years, at VND 3,000 bln. In 2018, PGB had the plan to merge into VietinBank, which could not happen. After that, HDBank had a merger agreement with PGB, but this plan was canceled in 2021. Due to its modest scale, PGB business results have been comparatively small. In the whole of 2022, PGB pre-tax profit reached VND 506 bln, an increase of 54 percent compared to the previous year, and exceeding by 24 percent in their yearly plan of VND 406 bln.
PGB is also under considerable pressure due to bad debts. By the end of 2022, PGB total VAMC loan balance was VND 951 bln, of which VND 350 bln was set aside and recovered, while the rest is expected to be recovered within the next three years. But with the current difficult situation, this goal seems very difficult. In the current difficult scenario, this goal also seems nearly impossible. At the end of 2022, outstanding loans for real estate businesses were at VND 2,000 bln, and construction loans were at VND 3,000 bln.
The Petrolimex divestment plan may put PGB at a disadvantage, but the stock still makes waves, showing that this stock is being blown in price because the current price is slightly higher. For instance, VPB is currently trading at more than VND 20,000, MBB at over VND 18,000, HDB at over VND 18,000, OCB at over VND 16,000, and SHB at over VND 10,000. Hence, PGB trading at VND 21,000 is unstable.
According to analysts, it is likely that PGB will be pulled up for beautifying the report. Last weekend, a senior leader of Vietnam Maritime Commercial Joint Stock Bank (MSB), confirmed that they were preparing a plan to merge with another bank to submit at the general meeting of shareholders for approval and the State Bank of Vietnam for further approval. Although it did not disclose the name of the bank, investors think it is PGB.
Starting price too high
One month earlier, the State Bank of Vietnam had approved in writing the proposal of Lien Viet Post Joint Stock Commercial Bank (LPB), about the transfer of more than 140.5 million shares of LPB owned by Vietnam Post Corporation (VNPost). Along with an announcement from the State Bank of Vietnam, the Hanoi Stock Exchange (HNX) also provided information about the auction of this stock on 21 April at a starting price of VND 22,908. At the time of the announcement, LPB was being traded at a price of less than VND 15,000. This means that the starting price offered by VNPost is 55 percent higher than the market price.
At the beginning of 2022, VNPost auctioned nearly 122.2 million LPB shares at a starting price of VND 28,930, equivalent to more than VND 3,500 bln for the whole lot. However, the auction failed miserably when only seven individual investors in the country successfully purchased only 800 shares, at an average auction price of VND 29,483.
With LPB, bad debt risk is also a factor that worries most shareholders. According to the financial report for the fourth quarter of 2022, the bad debt ratio increased by six basis points quarter-on-quarter and 13 basis points year-on-year to 1.5 percent by the end of 2022. In the whole of 2022, LPB used provisions to deal with VND 1,400 bln of bad debts, corresponding to a ratio of 0.6 percent of outstanding loans.
Investors concerned
A matter of concern to many investors is Petrolimex withdrawing all its deposits at PGB when the group has no commitment to withdrawing money. As of 31 December 2022, Petrolimex and its subsidiaries and associates have a total of nearly VND 3,156 bln in deposits at PGB. This figure is equivalent to more than 10 percent of the total customer deposits of this bank. Specifically, Petrolimex deposited VND 1,637 bln, including VND 1,037 bln in payment deposits and VND 600 bln in term deposits. Subsidiaries and associates have VND 217 bln in payment deposits and more than VND 1,302 bln in term deposits.
Similarly, after VNPost divested capital, LPB postal transaction offices will not be able to receive savings deposits and must take measures to pay off all savings deposits of customers previously received. Post offices will be closed after the deposit is paid. According to 2021 data, in addition to 76 branches and 480 normal transaction offices, LPB also operates 613 post offices. This can be considered a very large number and these postal transaction offices are also considered one of the biggest competitive advantages of LPB.
