More banks to take over finance companies under new decree Analysts predict a new wave of commercial banks taking over finance companies following a new government decree.   Decree No 39, which took effect in late June, will help finance companies become more “attractive”. They will be able to issue deposit certificates, short- and long-term bonds, treasury bills, provide guarantees, and issue credit cards. Banks, which are expanding their retail banking market share, are anxious to  buy finance companies. In late June, the State Bank gave the go-ahead to the VP Bank to buy 100 percent of Vinacomin Finance Company’s shares. Prior to that, at the shareholders’ meeting held in April, the Saigon-Hanoi Bank’s board of directors submitted a plan to buy a finance company. Meanwhile, some banks takeovers of finance companies were wrapped up many months ago. These included HD Bank purchase of SGVF from the French Société Générale, and the merger of PetroVietnam Finance Company (PVFC) with Western Bank to create PVcomBank. According to Nguyen Thien Bao, former CEO of PVFC, as soon as becoming a commercial bank, PVcomBank could begin providing many kinds of services to its potential customers, the workers of enterprises that were the subsidiaries of PetroVietnam. In theory, commercial banks can expand their network by setting up more branches and transaction points. However, it would be less costly and less time consuming to buy operational finance companies to reach the same goal. Under current laws, banks have to allocate at least VND300 billion to every bank branch and meet a lot of other requirements on staff and facilities to run the branches. Meanwhile, if they buy finance companies, they can take full advantage of the companies’ existing networks and services, especially consumer lending, which is the biggest advantage of companies. Analysts believe that it is now the right time to buy finance companies because the companies are inexpensive now. Many finance companies, after a period of development, have fallen into decay with high bad debt ratios. Meanwhile, their shareholders, many of which are state-owned corporations, now try to sell their shares out to withdraw capital from the companies as per the request from the government. As there are many sellers, analysts say, commercial banks would be able to buy finance companies at low prices. Truong Van Phuoc, deputy chair of the National Finance Supervisory Council, noted that banks now tend to develop retail banking services (they previously focused on lending money to businesses). Thus, buying finance companies is a good choice for them to implement the plan. VIB’s retail banking director Rahn Wood also said that commercial banks are now eyeing finance companies because the companies mostly have small capital, so they are inexpensive to purchase. Finance companies have been earning their living by lending internally. Therefore, the banks which can take over finance companies will automatically “inherit” large numbers of potential customers. Vimico, for example, is a subsidiary of Vinacomin, but it also has subsidiaries of its own, including four dependent companies, 13 subsidiaries and seven joint ventures. NLD