Singapore's United Overseas Bank (UOB) is close to sealing a deal to buy 100 per cent stake in the Vietnamese small-lender GP Bank. — Photo courtesy

Newswire Baodautu.vn reported this, quoting a board member of the National Monetary Policy Consulting Committee who spoke about the deal.

While the price tag of the deal is yet to be disclosed, industry experts said that the amount was probably not a large one.

"GP Bank is one of the nine weak banks which once ran an estimated bad debt higher than their charter capital. Buying the bank means taking over a large amount of debt; they would never pay a large amount," an expert told Baodautu.vn.

GP Bank was developed from the Ninh Binh Rural Commercial Joint Stock Bank to become an urban commercial joint stock bank. It has been operating in Ha Noi since November 7, 2005. One of nine ailing banks which were forced by the central bank to restructure, GP Bank has a head office and nearly 80 branches and transaction sites nationwide, together with a workforce of more than 1,400.

The deal will be completed if it gets the Prime Minister's approval.

The Decree issued on January 3, 2014 by the government said that in special cases of restructuring weak credit institutions and to ensure the safety of the banking system, the prime minister will decide the foreign ownership in a local bank. The total stake of foreign investors could exceed the 20 per cent limit for strategic investors or 30 per cent of the total room for foreign investors in each specific case.

"Banks which have no choice but to do mergers and acquisitions normally fail to secure equity and manage debts. Therefore, they have to accept capital losses," independent expert Nguyen Chi Hieu said.

Hieu suggested that leaders of weak banks which are on the brink of getting involved with mergers and acquisitions should understand their own situations in order to decide the right price for investors, or they won't be able to attract investors with a huge amount of debts. — VNS