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Saigon Hanoi Bank: Aggressive Growth

Saigon Hanoi Bank (SHB) began as a very small, rural bank based in the Mekong delta region of Can Tho.

They were previously known as Nhon Ai Rural Commercial Bank that focused primarily on servicing loans for agriculture and other rural banking services. It was only in 2006 when it was converted into an urban commercial bank and re-branded itself as Saigon-Hanoi Commercial Bank (SHB). In fact, SHB only opened its first branch in Ho Chih Minh City on 17 Oct 2006.

After becoming an urban commercial bank, however, it has grown aggressively and in 2010, it had a total of 116 offices throughout Vietnam.

Special Features of SHB

The commercial groups backing SHB are the state-owned mining monopoly Vinacomin, Vietnam Rubber Group and T&T Group.

I believe that SHB must have sacrificed credit quality in its quest for growth as I believe that its NPL is one of the highest among the listed banks.

Other than commercial banking services, SHB has also funded some large (and fairly diverse) projects compared to its balance sheet, e.g., the "500 KW line Hiep Hoa Quang Ninh" valued VND 830 billion, indoor Stadium in Da Nang City worth VND 500 billion. Moreover, SHB provided $ 15 million for golf project of Vinacapital in Danang.

In the beginning stages of growth, e.g., in 2007, it relied extensively on the interbank market (as opposed to customer deposits) for growth in the past few years, customer deposits have caught up somewhat.

This bank also is quite aggressive in the use of its capital, investing in a great variety of businesses and holding a minority stake. Some examples are: SHB Vinacomin Insurance, Lilama-SHB investment and construction, Gentraco etc.

Fee income has been traditionally insignificant for SHB. Only recently, the company has taken steps into the debit/credit card business.

Financial Information

I have financial information on the company only from the year 2006. This is the year where SHB was rebranded, changing its name and its business focus from that of a rural bank focused on agricultural related activities to a full commercial joint stock bank.

If one looks at the profitability metrics of SHB, we can see that the bank is not particularly profitable, lagging behind many of the other more profitable banks like Military Bank and Asia Commercial Bank in most of the measures of profitability like ROA, ROE and NIM.

Certainly, this is the price of growth. I believe that SHB, in the bid to grow as fast as possible, they must have tried many things to get more deposits from customers. Certainly these measures must have hurt their bottom line significantly.

Growth Rate

This is where things get interesting …

At this rate of growth, I believe that SHB is right at the top as one of the fastest growing banks in Vietnam.

Unlike banks like Asia Commercial Bank which has already matured, SHB is still in the fast growing stage of development. This is why you can see this fantastic rate of growth of the bank. I believe that comparing its total assets with the other more established players, SHB still has a few good years of growth ahead.

Merger of Habubank with Saigon Hanoi Bank Before 2006, Saigon Hanoi Bank was a pretty insignificant bank. However, Habubank then was quite a good sized bank at that time. I still remember in 2004, when I was trying to decide which bank to buy on the OTC market, I had narrowed down to only 3 candidates and Habubank was one of these that I considered.

But how things had changed. With the speed at which SHB grew, it is now in a position to buy over HBB.

Of course, both HBB and SHB (and even the State Bank) had denied that the merger is going to through. However, looking at the trading pattern of the stocks of HBB and SHB, it certainly looks likely that both banks are going to merge.

If this merger goes through, SHB will almost double their assets, putting them in the league of larger banks like Military Bank.

This will certainly be a big boost to their expansion plans.