The research objective of the thesis is to evaluate the financial capacity of commercial banks after M&A in Vietnam according to Camels criteria in the past time, thereby offering solutions to improve the financial capacity of commercial banks after M&A in Vietnam in the coming time.
MINISTRY OF EDUCATION AND TRAINING NATIONAL ECONOMICS UNIVERSITY THE DISSERTATION ARE COMPLETED AT NATIONAL ECONOMICS UNIVERSITY - Science instructor: PROF.DR LE DUC LU DR HOANG VIET TRUNG NGUYEN THI VAN Reviewer : RESEARCH THE FINANCIAL CAPACITY OF COMMERCIAL BANKS AFTER M&A IN VIETNAM BY CAMELS CRITERIA Major: FINANCE - BANKING Code: 9340201 THE SUMMARY OF THE DISSERTATION Reviewer 2: Reviewer 3: The dissertation is protected at the Council of thesis National Economics University At:… hours, date …… month …… 2022 The dissertation can be found at: - National Library - Library of National Economics University HA NOI – 2022 INTRODUCTION owned commercial banks or Vietnamese commercial banks in general, Necessity of research After implementing the project on restructuring the credit institution system in phase (2011-2015) and phase (2016-2020), banking M&A activities in Vietnam as of 2021 still have not been completed professional, small in number, sometimes spontaneous, sometimes due to the pressure of mechanisms and regulations in legal but has not studied commercial banks after M&A implementation For the above reason, the author has chosen the topic "Research on the financial capacity of commercial banks after M&A in Vietnam according to CAMELS criteria" to continue to contribute more in terms of theoretical aspects of the role of financial capacity in Vietnam's commercial banking system Research purpose documents, not yet derived from the economic interests of the bank The research objective of the thesis is to evaluate the financial and the economy economic, thus inexperienced and poorly informed capacity of commercial banks after M&A in Vietnam according to Moreover, after restructuring, new commercial banks were formed, Camels criteria in the past time, thereby offering solutions to improve which is the result of M&A deals But after a while, how these the financial capacity of commercial banks after M&A in Vietnam in commercial banks develop and how effective they are, it is a difficult problem that bank administrators must continue to solve Therefore, the coming time Object and scope of research the question for commercial banks after M&A is how to improve 3.1 Object of research: The thesis focuses on studying the financial capacity to maintain stability after M&A and the bank to still financial capacity of commercial banks after M&A in Vietnam according to Camels criteria operate effectively To answer this management question, it is necessary to have in-depth research methods and econometric applications in analyzing and evaluating the financial capacity of Vietnamese commercial banks after M&A In the world, financial analysts have used different approaches such as: Dupont, DEA, CAPM, Probit, Proxy, Logistic to assess a bank's financial ability to see if it is secure according to the standard Moody's, First, Camels, Basel or not; in which, assessing financial capacity according to Camels criteria is the most commonly used Moreover, in recent years, there have been quite a few studies evaluating the financial capacity of Vietnamese commercial banks, however, most of these studies approach the traditional qualitative and quantitative analysis methods The scope of the study is only limited to analysis for a few state- 3.2 Scope of research - About space: M&A activities take place on a wide scale including businesses, companies and credit institutions Within the scope of the thesis, the author only focuses on typical commercial banks that have participated and succeeded in M&A deals in Vietnam, including: SHB, HDBank, SCB, LPB, PVcombank, Sacombank, Maritimebank, BIDV The thesis does not focus on studying M&A deals of other economic organizations - About time: The data used to implement the thesis was collected over a period of years from 2011-2019 starting from the implementation of M&A deals in 2011, including available data from financial statements, annual reports of commercial banks after M&A CHAPTER in Vietnam, reports of the State Bank, reports of the world bank, reports of the banking supervision system RESEARCH OVERVIEW AND THEORETICAL BASIS ON FINANCIAL CAPACITY OF COMMERCIAL Research Methods The thesis uses a combination of research methods: methods of analysis, synthesis, logical thinking; Statistical and comparative methods; Quantitative research methods New contributions of the thesis The structure of the thesis In addition to the introduction and conclusions, the thesis is structured into chapters: BANKS AFTER M&A 1.1 Research overview 1.1.1 Overview of research works related to the assessment of financial capacity of commercial banks The topic of financial capacity of commercial banks is a topic that has been studied a lot in the world, in which there have been many research works using the methods Dupont, DEA, Capm, Probit, Logistic to assess the financial capacity of a commercial bank to see Chapter 1: Research overview and theoretical basis on financial if it meets Camels, Basel, Moody's, and First standards To focus on capacity of commercial banks after M&A Chapter 2: Status of financial capacity of commercial banks the research content of the thesis, the author has studied relevant after M&A in Vietnam according to Camels criteria domestic and foreign research works such as: Alli Nathan and Edwin Neave (1992), R Alton Gilbert et al (2002), Le Thi Huong (2002), Chapter 3: Evaluation of financial capacity of commercial Judijanto and Khmaladze (2003), Nguyen Thi Viet Anh (2004), Le banks after M&A in Vietnam according to Camels criteria by Logistic Dan (2004), Michelle L Barnesa and Jose A.Lopez (2005), Pham binary regression model Thanh Binh (2005), Frank Heid (2007), Nguyen Viet Hung (2008), Chapter 4: Solutions to improve financial capacity for commercial banks after M&A in Vietnam Hoang Van Thang (2009), Podviezko and Ginevičius (2010), John Tatom (2011), Gupta and Aggarwal (2012), Lee et al (2012), Phan Thi Hang Nga (2013)… 1.1.2 Overview of research works related to commercial bank M&A activities M&A activities of commercial banks have developed widely around the world, but this activity has only grown strongly in Vietnam after the project of restructuring commercial banks in the period 2011 - 2015 and the period 2016 - 2020 of the Government Therefore, the works in the world on this issue are quite rich and diverse, but in Vietnam so far, it is still limited by research works on M&A bank after the M&A is a specially formed commercial bank - the main Researches related to commercial bank M&A can be summarized in different ways as follows: Jonathan M.W & Angel.L (2008), Yener result of the banking M&A deal Through that, a commercial bank after M&A has both the characteristics of a commercial bank in Altunbaşa and David Marquésb (2008), AnthonyN Rezitis (2008), Elena.B& Pascal F (2009), Bui Thanh Lam (2009), Ahmad Ismail general and the characteristics of M&A activities in particular (2010), Andrea B & Giovanna.P (2012), Ioannis A& Panayiotis P.A banks after M&A (2013), Phan Dien Vy (2013), Nguyen Thi Dieu Chi (2014), Nguyen 1.3.1 The concept of financial capacity of commercial banks after M&A Quang Minh (2015)… 1.2 Theoretical basis of commercial banks after M&A 1.3 Theoretical basis of financial capacity of commercial The financial capacity of commercial banks after M&A is the 1.2.1 Overview of M&A in banking activities financial ability for the bank to generate stable profits and achieve higher 1.2.1.1 The concept of M&A 1.2.1.2 M&A classification profit rates than before, higher than the average of the banking industry; for the Bank to conduct and develop business operations safely and 1.2.2 Commercial bank after M&A effectively, and at the same time affirm its position in the market 1.2.2.1 The concept of commercial bank M&A Merger and Acquisition (M&A) of a commercial bank is an activity in which a combination or acquisition of two or more commercial banks takes place through the transfer of part or all of its assets, rights and interests, obligations and legitimate interests of the 1.3.2 Contents of financial capacity of commercial banks - Financial capacity of commercial banks represents the ability of commercial banks to create capital - Financial capacity of commercial banks is also reflected in the ability to "use capital" of commercial banks - Financial capacity shows the ability of commercial banks to participating commercial banks in order to achieve the goals of each bank, and at the same time create new values for the commercial bank realize profit goals in business after conducting the M&A - The financial capacity of commercial banks also includes the financial safety of the commercial banking system 1.2.2.2 The benefits and limitations of commercial bank M&A 1.2.2.3 Methods of carrying out M&A of commercial banks Voluntary negotiation, collection of shares on the stock market, tender offers, property purchases, enticing disgruntled shareholders 1.2.2.4 The concept of commercial banking after M&A Commercial bank after M&A is a commercial bank formed right after banking M&A activities take place Therefore, a commercial 1.3.3 Assessing the financial capacity of commercial banks after M&A according to CAMELS criteria 1.3.3.1 Capital Adequacy: Size of Equity, Minimum Capital Adequacy Ratio (CAR), Equity/Total Assets Ratio, Financial Leverage, Internal Capital Generation Ratio, Reserve Capital Ratio 7 1.3.3.2 Asset Quality: Loan balance/total assets, NPL ratio, Provision expense ratio, Investment ratio Fixed assets, Nonperforming loan recovery capacity (NPLs), Provision ratio CHAPTER THE STATUS OF THE FINANCIAL CAPACITY OF THE COMMERCIAL BANKS AFTER M&A IN VIETNAM FOLLOWING THE CAMELS CRITERIAS 1.3.3.3 Management: Earnings growth, Credit growth, Net operating profit per employee 1.3.3.4 Earnings: Return on Assets (ROA), Return on Equity (ROE), Net Interest Margin (NIM), Non Net Interest Margin (NNIM) 1.3.3.5 Liquidity: Deposit/Total Assets, Total Debt/Deposit, Asset Liquidity Ratio, Deposit Coverage Ratio, Short-Term Liquidity Ratio 1.3.3.6 Sensitivity to market risk (S - Sensitivity) 2.1 Overview of M&A situation of Vietnamese commercial banks 2.1.1 M&A situation of Vietnamese commercial banks in the period of banking restructuring after the Asian financial crisis (1997-2003) 2.1.2 M&A situation of Vietnamese commercial banks in the 1.3.4 Factors affecting the financial capacity of commercial banks after M&A period when Vietnam joined the World Trade Organization (2004- 1.3.4.1.Objectivefactors:Legalenvironment, socio-political environment, financial market, factors of economic environment commercial joint stock banks; Domestic joint stock commercial 1.3.4.2 Subjective factors: size of equity, management capacity of bank administrators, size and quality of assets, bank profitability, liquidity 1.4 Experience in improving financial capacity of some commercial banks in the world and lessons learned for commercial banks in Vietnam 1.4.1 Experience in improving financial capacity of some commercial banks in the world: Experience from the US, experience from China, experience from Thailand, experience from Korea, experience from Japan 1.4.2 Lessons for Vietnamese commercial banks 2010): Mutual share purchase and sale deals of domestic banks sell shares to foreign banks 2.1.3 M&A situation of Vietnamese commercial banks in the restructuring period of the banking system (2011-2015): Share deals, mergers, consolidation deals, acquisitions 2.1.4 M&A situation of commercial banks in phase of restructuring the banking system (2016-2020) 2.2 Status of financial capacity of commercial banks after M&A in Vietnam according to CAMELS criteria 10 Table 2.8 List of Banks after M&A used for analysis the two banks after the M&A with a financial leverage ratio that is Order Trading name Bank name Year relatively consistent with Camels' criteria This shows that these banks have effectively used the financial leverage ratio, thereby LPB Lien Viet Post Commercial Joint Stock Bank 2011 SCB Saigon Commercial Joint Stock Bank 2011 financial leverage ratio is too high, indicating that the bank has not SHB Saigon - Hanoi Commercial Joint Stock Bank 2012 used this ratio effectively, which will lead to the risk of the bank's HDBank Ho Chi Minh City Development Commercial 2013 Joint Stock Bank PVcombank Vietnam Public Commercial Joint Stock Bank 2013 better in 2017 In 2018, 2019 this coefficient is 16.17 times and Sacombank Saigon Thuong Tin Commercial Joint Stock Bank 15.06 times higher than Camels' regulatory framework and this BIDV increasing the operational efficiency and safety of the bank The insolvency leading to bank bankruptcy Meanwhile, Maritimebank has a much smaller leverage ratio than Camels criterion with a leverage factor of 6.7 times in 2015, 5.8 times in 2016 and 7.2 times 2015 Joint Stock Commercial Bank for Investment 2015 and Development of Vietnam shows that Maritimebank has not effectively used the financial leverage coefficient and the bank's operational efficiency will not be optimal BIDV had a fairly high financial leverage ratio in 2015- Maritimebank Vietnam Maritime Commercial Joint Stock Bank 2015 2.2.1 Capital Adequacy 2.2.1.1 Scale of equity: The scale of equity of commercial banks after M&A in Vietnam tends to increase gradually over the years but the growth rate is not high Among banks, BIDV and HDBank have the strongest equity growth Compared with Camels criterion, among the commercial banks after M&A in Vietnam, there are banks, 2017 after M&A, exceeding Camels' regulatory framework, but this ratio fell below the regulated level of 8.97 times and 9.56 times in 2018 and 2019 2.2.1.3 Equity/Total Assets Ratio: The ratio of equity/total assets of commercial banks after M&A in Vietnam is larger than the American AIA's Camels criterion (≥ 4% - 6%) In which, HDBank, PVcombank, LPB, Maritimebank are banks with high equity/total Sacombank and BIDV, whose equity capital has reached the standard assets ratio, especially Maritimebank This shows that banks > 20,000 billion, the rest are not achieved, even Even LPB, HDBank, maintain enough capital, the amount of additional capital from and PVcombank have less than 50% of the standard business results is increasing, proving that banks are operating more 2.2.1.2 The financial leverage ratio: The financial leverage ratio effectively and safely of most commercial banks after M&A in Vietnam tends to increase, 2.2.1.4 Minimum capital adequacy ratio (CAR): Vietnamese showing that banks are asserting their credit expansion goals Among commercial banks after M&A have CARs all over 9%, exceeding the commercial banks after the M&A, HDBank and PVcombank are Camels' capital adequacy standards, of which Maritimebank is the 11 12 bank with the highest CAR at 24.53% in 2015 and by 2016 The bank gradually, higher in the early years after M&A Among the banks has adjusted this coefficient to be 14.6%, in 2017 it was 19.97% studied after the M&A, LPB, HDBank, and BIDV are the banks with However, the minimum capital adequacy ratio is at 9%, but if it is too the bad debt ratio since the M&A implementation is less than 3% high, the capital efficiency is not high Particularly for 2019, banks according to the regulations of the State Bank of Vietnam, but that meet Basel standards with the minimum capital adequacy ratio compared to Camels criteria only in 2015 was 0.88% < 1% qualified according to Circular 41 must have a CAR> 8%, according to this SCB, SHB, Pvcombank, Sacombank, Maritimebank had a high bad standard it is difficult for banks to achieve this ratio more secure debt ratio in the early years after having just implemented M&A with because the risk is calculated according to pillars including a bad rate of > 3%, which was not guaranteed according to the operational risk and market risk, but BIDV, LPB, HDBank all meet regulations of the State Bank of Vietnam and this ratio has been the requirements approved controlled and gradually decreased after one or two years 2.2.2 Assets quality after M&A implementation However, this ratio is satisfactory 2.2.2.1 Loan balance/total assets: The ratio of outstanding loans according to the regulations of the State Bank of Vietnam, but to total assets of commercial banks after M&A in Vietnam tends to according to Camels criteria, it is not up to the standard increase, except for Sacombank and SCB Loan balance tends to 2.2.2.3 Provision expense ratio increase, which is consistent with the current stage of economic In the years of operation after the M&A, only PVcombank and development Compared with American AIA's Camels criterion, the Sacombank have acceptable provision expense ratios according to ratio of outstanding loans to total assets is 60% and looking at the data Camel criteria, but in contrast, BIDV's provision expense ratios are table on the ratio of outstanding loans to assets of Vietnamese smaller than Camels criteria (1.5%) ) As for other banks, the ratio of commercial banks after M&A shows that the majority have the loan- provision expenses over the years after M&A has fluctuated larger or to-asset ratio is within the safety standard framework of Camels, smaller than Camels' safety framework except for SHB and Sacombank, Lienvietpostbank in 2018, 2019; 2.2.3 Management SHB for the period 2014-2019; Sacombank; BIDV in the period 2015- 2.2.3.1 Income growth rate 2019 however this indicator is still acceptable and while Maritimebank has this ratio as low as 40% Profit after tax of commercial banks after M&A in Vietnam fluctuated, there were differences between banks, and profit after tax 2.2.2.2 Bad debt ratio increased more strongly in 2019 with the exception of SCB Among Banks have good credit risk management, and bad debt ratios are the banks performing M&A, BIDV and HDBank have gradually well controlled The bad debt ratio of banks tends to decrease increased profits since the M&A date up to now and have met Camels' 13 14 standards Lienvietpostbank, SCB, SHB are banks that carry out M&A Camel criteria, while other banks have not, this ratio is low Banks at a time when Vietnam's economy is facing difficulties, rising with the lowest ROE ratio are SCB and PVcombank (