What Will the Future Hold for Struggling Sacombank as Novaland Drops Stake Purchase Plan?

Tuan Minh

15:49 17/04/2017

BizLIVE - Real estate company Novaland has dropped out of a race to purchase a majority stake in Sacombank as the Vietnamese central bank is seeking to revamp the local banking system.

What Will the Future Hold for Struggling Sacombank as Novaland Drops Stake Purchase Plan?

Sacombank's destiny remains unclear ahead of its AGM. Photo: Internet

The fate of Sacombank remains uncertain after real estate developer Ho Chi Minh City-based Novaland quit a plan to join Sacombank’s restructuring plan, citing headwinds.
Novaland in mid-December 2016 sent a proposal to the State Bank of Vietnam (SBV), the country’s central bank, asking for permission to buy a 20% stake in Sacombank to join the bank’s restructuring plan.
“While we awaited [SBV] approval, a lot of information unfavorable for us has arisen,” Bui Thanh Nhon, chairman of Novaland, told local press.  
How Financially Strong Is Novaland?
According to Ho Chi Minh City Stock Exchange-listed Novaland (NVL)’s consolidated financial statement, the company had total assets of 36.53 trillion dong ($1.6 billion) as of December 31, 2016, up 37.5% year-on-year.
Its owner’s equity jumped 64.7% year-on-year to 10.05 trillion dong ($440.8 million), of which its registered capital rose 62% to 5.96 trillion dong.
The firm earned a net profit of 1.66 trillion dong ($73 million) on revenue of 7.36 trillion dong ($322.7 million) last year, representing increases of 300.8% and 10.3% from 2015, respectively.
Notably, its liabilities increased 29.3% year-on-year to 26.48 trillion dong ($1.16 billion) in 2016. Meanwhile, its cash and cash equivalent was 3.34 trillion dong ($146.3 million) at end-2016.
The developer has succeeded in raising funds recently. In 2015, NVL sold preferred shares to VinaCapital, Dragon Capital and a domestic financial firm for nearly $50 million. It took out a loan worth $100 million from Credit Suisse in 2016.
In November 2016, it raised nearly $120 million from a private placement to Dragon Capital, VinaCapital, Singapore’s sovereign fund GIC, J.P. Morgan, RWC Partners, Duxton Asset Management, among others, according to VnEconomy.
Meanwhile, shares of Sacombank (STB) have gained some 53% over the last three months, trading at 13,150 dong ($0.58) apiece at 14:00 on April 7. Its shares dropped 2.6% to 11,200 dong ($0.5) each at the close on April 17.
With such a market price, the bank is capitalized at $900 billion, according to exchange data. One fifth of the bank has a price of $180 million.
Merger with SouthernBank Drags down Sacombank
Sacombank, which stands for Saigon Thuong Tin Commercial JS Bank, has seen its business performance go south after merging smaller SouthernBank into it in October 2015 due to the latter’s hefty trouble loans.
According to audits conducted by the State Bank of Vietnam (SBV), the country’s central bank, SouthernBank’s bad debt ratio stood at 45.6% in mid-2012 and 55.31% at end-2013, far above 3.39% reported by the bank.
Consequently, huge provisions for credit losses caused Sacombank to incur a loss of 538 billion dong in Q4/2015 and a net profit of 1.15 trillion dong in the whole 2015, compared to a profit of 2.21 trillion dong in 2014.
Its 2016 financial statement shows that Sacombank’s net profit dwindled 67.5% year-on-year to 372 billion dong ($16.3 million).
The bank’s bad debt accounted for 5.35% of its total credit as of end-2016, compared to 1.82% a year earlier, not to mention the amount of trouble loans sold to the SBV-run Vietnam Asset Management Company (VAMC) and receivables, which are unmasked toxic debts on its balance sheets.
Return of Old Boss
Dang Van Thanh, the founder and former chairman of Sacombank, has expressed intention to acquire a controlling stake in the lender after forcibly leaving it five years ago as tycoon Tram Be stepped in.
Thanh, together with two foreign businesses namely Evercore Group and Redsun Capital Limited, has asked for the central bank’s approval to pump 20.6 trillion dong ($907 million) to acquire at least a 50% stake in the bank.
U.S.-based Evercore Group operates in the investment banking field while Redsun Capital is focused on M&A consultancy.
After receiving all the holdings by Tram Be and his family in Sacombank in August 2015, the SBV reportedly owns a 51% stake in Sacombank.
With the withdrawal of Novaland, Thanh and the foreign partners remain the sole candidate to join Sacombank as strategic investor.
After leaving Sacombank, Thanh focused on his family-run Thanh Thanh Cong Group (TTC), which operates mainly in sugar, tourism and energy sectors. TTC is said to control between 30% and 40% of Vietnam’s sugar market.
At the end of 2015, TTC had a registered capital of 11.3 trillion dong as of end-2015. It earned a pre-tax profit of 1.1 trillion dong on revenue of 15.4 trillion dong.
Before merging SouthernBank, Sacombank was among the leading financial retail institution in Vietnam, with a wide-reaching network and solid fundamentals. The bank will make a breakthrough if it is run by a more professional, capable and transparent apparatus, according to Dominic Scriven, CEO of Dragon Capital, a former shareholder of Sacombank.  
It is unclear Thanh and his team will invest in Sacombank as long-term shareholders or financial investors, who may take profit when returns meet their expectation.
The bank’s fate may become clearer at its annual general meeting to be held on April 28.

TUAN MINH

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