Vietnam - Western Bank to merge with PetroVietnam Finance

The merger between Western Bank and PetroVietnam Finance (PVF) is moving ahead after Western Bank released the merging scheme prior to its shareholder meeting this Saturday.

Domestic media recently reported on the possibility of the merger, but both sides had declined to comment. Meanwhile, the document shows that the State Bank of Vietnam and the Vietnam National Oil and Gas Group (PetroVietnam) approved the merger a year ago.

Accordingly, in May last year, PVF and Western Bank signed a deal on restructuring the bank. According to the agreement, PVF would comprehensively restructure Western Bank, including restructuring of capital, assets and liquidity support.

Also in May, the two parties agreed on a preliminary plan so that PetroVietnam could approve auditing procedures and hire consultants.

In July, WesternBank started to restructure its assets to improve profitability and mitigate risks and ensure the success of the merger at the central bank's request.

As the two parties were transferring shares a month later, information about the merger leaked out, catching investor attention. However, PVF at the time denied news on any merger or acquisition.

The process of preparing for the consolidation continued in the following months resulting in a detailed plan, a contract and a draft charter of the new entity signed by PVF and Western Bank chairmen and submitted to PetroVietnam in late November.

Sources familiar with the matter said the merger could be completed in the second quarter of this year.

Meanwhile, in order to ensure the liquidity of PVF before the merger, PVF asked PetroVietnam for support in working with partners and competent agencies. PVF also asked for a loan of VND7 trillion ($333.3 million) with a minimum term of six months.

The financial firm also asked its parent company to encourage other businesses to use the services of the entity after the merger.

Both PVF and Western Bank asked for loans worth VND30 trillion ($1.4 billion) from the central bank in three to five years. Lending rates were proposed to be 6 per cent lower than deposit rates to cover costs during the merger.

PVF has total assets of VND90 trillion ($4.2 billion), much higher than several commercial banks.

However, it is a financial company that is unable to raise capital from individuals.

After the merger, the organisation will function as a bank while enjoying the significant advantage of having the PVF brand and its links with the oil and gas industry.

PetroVietnam currently holds a 72 per cent stake in PVF, but the ratio will decline to 48 per cent after the merger. Morgan Stanley's stake will also be reduced from 10 to 6.7 per cent.

VNS

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