Vietinbank announces a plan to merge with PGBank on April 14. — Photo caffef.vn

"VietinBank has actively searched for credit institutions suitable for its development strategy…We have found that PGBank is a potential institution that can merge with us," Vietinbank Chairman Nguyen Van Thang said in a statement at a shareholders meeting in Ha Noi today.

Thang said his organisation planned to become a banking and finance group, which would hold a key position in the domestic banking system, and have a size and capacity in line with regional levels. It would also look for gradual expansion into international markets.

The Viet Nam National Petroleum Group (Petrolimex) is a strategic shareholder that owns 40 per cent of PGBank's equity. In this manner, PGBank has significant competitive advantages, based on the customer network of the petroleum company, as well as financial and monetary services the firm was using, he said.

On December 31, PGBank had a charter capital of VND3 trillion (US$142.86 million) and a total asset value of about VND25.78 trillion ($1.23 billion). Its outstanding loans reached VND14.50 trillion ($690.48 million) and pre-tax profits hit VND168 billion ($8 million).

PGBank had a charter capital of VND3 trillion (US$142.86 million) and a total asset value of about VND25.78 trillion ($1.23 billion). — File Photo

Thang said the merger would help the bank boost capital, develop expanded branches and foster retail services, besides stepping up lending and investment. It is expected to open up new opportunities for VietinBank and Petrolimex to head strategic co-operation, whereby shareholders, customers and the State will also benefit.

"The merger, together with the reorganisation of PGBank, also reflects our high determination for implementing general directions of the Government and the State Bank of Viet Nam (SBV) for restructuring the banking sector… stabilising and developing the economy," Thang noted.

SBV Governor Nguyen Van Binh had urged Vietinbank in January, along with Vietcombank, to actively take part in the national banking reform process by handling weak lenders in the country. This was also part of the general scheme to consolidate the two banks' positions in the market in the future.

Thang said the potential merger was based on spontaneous intentions, and VietinBank had collaborated with financial consultant Deloitte and legal advisor Mayer Brown JSM to draft a merger contract.

Audited reports, presented at the April 14 meeting, state that VietinBank had some VND661 trillion ($31.48 billion) in total assets and roughly VND37 trillion ($1.76 billion) in equity at the end of last year.

In 2014, its pre-tax profits hit about VND7.3 trillion ($347.62 million), down 5.8 per cent from the previous year. Outstanding loans grew 18 per cent year-on-year, to touch VND542.68 trillion ($25.84 billion).

In 2015, the bank projected deposit growth at 14 per cent and loan growth at 13 per cent, and control of the bad debt ratio at below 3 per cent. — VNS