Two Billion Dollar Banks Duke It Out in Vietnam

A long-rumored conflict between two of the biggest players in Vietnam’s banking industry is now out in the open, and it appears to be helping drive a rally in the country’s public equity markets.  Eximbank is trying to gain control of Sacombank through an unprecedented maneuver calling for re-election of Sacombank’s directors and supervision board.

Both banks have grown impressively along with Vietnam overall and are now $1 billion pillars of the country’s economy.  As rumors grew of the takeover attempt by Eximbank, the stock price has grown 16% in Sacombank (STB), which has a price-to-earnings ratio below 6 and pays nearly 7% dividends after the surge in market capitalization.  Eximbank (EIB), with P/E ratio of 7 and 9% dividends, has experienced an 18% spike this month.  

Eximbank wants a restructured board because it thinks it now has control of the majority of Sacombank’s stock after several major shareholders withdrew capital from Sacombank — including foreign entities Dragon Capital and ANZ Bank — while Eximbank has entered the vacuum.

Eximbank wants Sacombank to adopt a more aggressive business plan, one aiming for profits 15% higher than planned for this year.  For its part, Sacombank challenges the idea that Eximbank has majority control and contends its board members should serve out their terms through 2015.  

For Vietnam, this is a new adventure not only for the banking industry but also for the still-evolving relationship between the public and private sectors as the country continues its transition toward a free market economy.

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