finance & business news 28 February 2017 FINANCE . 1 Khanh Hoa calls for increased economic cooperation with SBV announces compulsory M&A for weak banks 1 US, Russia 30 Credit grows strongly in Jan 3 Low-cost apartment developers face big challenges 30 Banks eye higher credit growth, profits 3 BIZ NEWS . 31 Vietnamese banks overly dependent on credit growth 3 Business Briefs February 28, 2017 31 Anti-dollarisation efforts face challenges 4 Shares up on investor confidence 32 Dividends: should shareholders sympathise with banks? 5 Shares inch up on blue chips 32 Financial leasing companies hard-pressed for foreign capital 6 All indexes close up 33 Voluntary social insurance attracts little interest 7 VietJet stock jumps 20 pct on debut - exchange 33 Non-life insurers cautiously set 2017 growth target 8 PENM IV Germany to buy HPG shares 34 Vietnam bank tycoon, former executives face trial over $66 HSX puts 21.6mn PVB shares on warning list 34 million losses 9 First local realty investment trust debuts on bourse 34 VNPT to sell stake at Maritime Bank 10 Market correction seen continuing into this week 35 Credit and land policies for agriculture should be loosened 10 Japanese prefecture seeks opportunity in Vietnam 36 Collecting taxes from online stores possible -- experts 11 Vegetable, fruit exports to struggle 36 Big credit contract secured for Cam Ranh airport's terminal Agro-forestry-fishery export value increases 37 project 12 Deputy PM pushes for VNPT's divestment 38 Reference exchange rate revised up 4 dong 12 Vietnam attends India-CLMV business forum 38 Apec committees, working groups finish 10th day of SOM 1 12 Deputy PM demands review of fee at ports 39 Apec 2017 offers opportunities for Vietnamese enterprises 13 Vietnam to adopt higher quality petrol standards 39 VN posts trade deficit of $1.2b in February 13 HCM City and Hanoi lead e-business index 40 Foreign investment in HCM City soars in two months 14 Fertiliser imports fair, says regulator 40 VN join mutual cooperation conference 14 Vietnam refinery predicts profit dips 41 FDI capital in real estate posts year-on-year twelvefold increase 15 Buyers rush to purchase first Japanese apartments in Vietnam, Asian neighbours hold trade pack talks amid TPP Phu My Hung 41 hiccup - report 15 Japan's leading sports company enters Vietnam 42 Vietnam, Brunei target $500m two-way trade by 2025 16 Central city to start solar power project 43 City officials seek tax on sales via Facebook 17 VN's chicken industry takes flight 43 Vietnam-US double taxation avoidance agreement approved 18 Vinalines' port activity surges 44 Long An moves to lure FDI 18 Mekong organic farming initiative receives US grant 45 Quang Ninh: cross-border trade flourishes 19 Vietnam's Jan-February rice export volume dips, value Vietnam's sole operating oil refinery sets surprisingly low profit slides faster 45 target 19 Japanese firm to set up medical device factory 45 Ministries to focus on improving business environment 20 Britain regards Vietnam as key trading partner 46 Ministry explains giant losses at Ninh Binh Fertiliser Plant 21 Agriculture ministry backs cooperatives to build material M&A again become hot issue in banks' annual shareholders zones 46 meeting season 22 February sees international visitor arrivals soaring 42.2pct y-o-y 47 M&A in pharmaceutical industry almost inevitable 24 HCM City mulls setting up public transit authority 47 Huge competition seen in the investment race in mid-range First high-tech farming project begins in Thai Binh 48 apartments 25 Panasonic expands in Binh Duong 49 In Vietnam, Uber drivers whine about firm's unfair division of Korean firm builds electronic component plant at Phu Ha IP 49 revenue 26 Cau Tre to build food processing facility in Hiep Phuoc IP 49 Japanese automakers threaten to leave Vietnam again 27 Beverages lead FMCG sales 50 Vietnam-Lithuania business potential needs stimulation 28 Lotte to build second shopping mall in Hanoi 50 Foreign owners of indebted steel firm flee Vietnam 29 Telephone exports to RoK soar 51 FINANCE Intellasia Tel: +844 2213 2244 No. 21, lane 173/63/17, Ngoc Ha Ward, Ba Dinh Dist, Hanoi Fax: +844 3759 2034 © All Rights Reserved Email: [email protected] Websites: www.Intellasia.Net www.TriTueAChau.com Vietnam finance & business 28 February 2017 FINANCE SBV announces 28/FEB/2017 INTELLASIA | VIR compulsory M&A for The State Bank of Vietnam (SBV) currently encourages mergers and acquisitions weak banks (M&A) for weak credit institutions based on voluntary spirit and the assurance of rel- evant rights for both parties. However, this will turn into a compulsory activity if these institutions do not volunteer. SBV's plan The SBV is finalising the draft plan on restructuring the system of credit institutions combined with solving bad debts during 2016-2020 under the government's directions, to submit to the Politburo. On the basis of approval and instructions from the Politburo and the government, the SBV will be armed with these solutions in 2017. SBV Governor Le Minh Hung said that in the near future not only weak commercial banks, but weak financial institutions, financial leasing companies, and people's credit unions will also be forced mergers or acquisitions if necessary. The SBV has identified ailing financial institutions and their main weaknesses so that it can consult the appro- priate solutions. In particular, SBV has pointed out five weak commercial banks, including three "zero VND" banks Global Petro Commercial Joint Stock Bank (GP Bank), OceanBank, and FINANCE Vietnam Construction Bank (CBank), and has outlined suitable solutions to be used right after getting approval from the prime minister. The restructuring project of five weak banks, including the three "zero VND" banks mentioned above, as well as DongA Bank and Sacombank after acquiring Southern- Bank, have been submitted and approved by the Politburo. SBV has made a detailed plan for restructuring these banks and will carry out it in the near future. Beside small financial firms, financial leasing companies and people's credit unions have also been noted. In Directive No 02/CT-NHNN on strengthening the safety of the banking system through the restructuring of credit organisations, bad debt manage- ment, and monitoring and maintaining bad debts at a safe level, the governor of the SBV has emphasized the facilitation of the merger of weak credit institutions. Eligible investors are encouraged to join these restructuring initiatives to diminish the number of weak firms and enhance their competitive capacity. M&A is the way forward In fact, without M&A, it would be difficult for small and weak banks to survive and compete in a financial market unrecovered from crisis. Notably, when the chartered capital of these ailing banks is around VND3 trillion ($131 million), amidst poor ad- ministration and declining profits, voluntary M&A is the best option. Over the last three years, raising the chartered capital of some small banks was very hard, even when they issued preferred stocks. SaigonBank and DongABank are prime examples, with their difficulties in raising funds for numerous consecutive years. Four years ago, Saigonbank planned to increase its chartered capital from VND3 to 4 trillion ($131.4 to 175 million), but its capital was unchanged in 2016. Because existing shareholders are not willing to contribute more capital due to pessi- mism over growth potential, Saigonbank was proposed to merge into Vietcombank. Although the majority of shareholders in Saigonbank disagreed and vowed to restruc- ture, the bank's performance showed little results. Low chartered capital affects a wide range of indexes, such as total assets and the abil- ity to lend. When Basel II is going to be applied (it is currently being tested in 10 banks), many small banks will be unable to meet capital requirements. However, raising capital is not easy for small banks at the moment when the stock market is past its peak. Existing domestic and foreign investors are no longer willing to buy stocks. Director of VinaCapital Andy Ho believed that it is necessary to loosen policies for for- eign investors in the banking sector, allowing them to own more than 30 per cent. Since the end of 2011, SBV has dealt with nine weak banks. Some names have disap- peared from the financial market by means of M&A, such as HabuBank (merged with SHB), Western Bank (merged with PVFC), Tin Nghia Bank and FicomBank (merged with Sai Gon Commercial Bank-SCB), and DaiABank (merged withHDBank). http://www.vir.com.vn/sbv-announces-compulsory-ma-for-weak-banks.html Intellasia 28 February 2017 2 / 51 Vietnam finance & business 28 February 2017 Credit grows strongly 28/FEB/2017 INTELLASIA | THE SAIGON TIMES DAILY in Jan Banks have said credit in the banking system expanded 2.18 percent in January, much higher than in the same month of previous years. In January last year, credit declined 0.2 percent compared to December 2015. Credit at the end of the first quarter last year grew 1.54 percent against late 2015. The credit growth target for this year is about 18 percent, the same as in 2016. Of total outstanding loans, the amount in dong rose by 2.07 percent, while growth in foreign currency loans was stronger, 3.4 percent. This year the central bank has yet to release data on credit growth. But banks said the banking system is rapidly pumping huge amounts of money into the economy. Deposits fell 0.38 percent in January. In particular, deposits in dong and foreign cur- rency edged down 0.41 percent and 0.06 percent respectively. As a rule, the period before and after the Lunar New Year holiday (Tet), savings at banks slow down as the demand for cash tends to surge.