Frequent attrition of senior directors
In early October 2019, Saigonbank held an extraordinary General Meeting of its Shareholders to elect members for its Board of Directors and for its Supervisory Board for the term 2019-2024. In the previous term, the Board of Directors of Saigonbank had consisted of just four members, namely, Mr. Vu Quang Lam, Mr. Tran The Truyen, Ms. Tran Thi Viet Anh and Mr. Tran Sy Dong. The position of Chairman of the Board of Directors had still not been filled. At this meeting in October, Mr. Vu Quang Lam was elected as Chairman of the Board of Directors by the shareholders and the Board of Directors of Saigonbank.
At the end of 2015, Mr. Nguyen Phuoc Minh had resigned as Chairman of Board of Directors for the term 2013-2017 and Mr. Tran Quoc Hai was placed in this position at Saigonbank. At the same time, Ms. Tran Thi Viet Anh, who had worked in the bank for more than 20 years, resigned from the position of CEO. Both Mr. Nguyen Phuoc Minh and Ms. Tran Thi Viet Anh cited retirement plans. At that time, Mr. Vu Quang Lam was a member of the Board of Directors of Saigonbank and a staff of Phu Nhuan Housing Construction and Trading One Member Co. Ltd., along with being the Deputy General Director of Ho Chi Minh City Finance and Investment State-owned Company (HFIC). He was elected for the position of CEO in place of Ms. Tran Thi Viet Anh.
But in mid-2017, after only two years as Chairman, Mr. Tran Quoc Hai cited health reasons and resigned from his position. Mr. Pham Van Thong was then elected Chairman of Saigonbank and Representative of the Ho Chi Minh City Party Committee, owning more than 56 mn shares of Saigonbank, equivalent to 18.18% of the charter capital. In mid-2018, Mr. Pham Van Thong was dismissed as Chairman of Saigonbank by the Ho Chi Minh City Party Committee for wrongdoings related to transfer of compensation land in Phuoc Kien Residential Project at Phuoc Kien Commune in Nha Be District, and also in some other projects. Mr. Vu Quang Lam then took over as Chairman of Board of Directors of Saigonbank on 19 June 2018.
At the end of June 2018, Saigonbank held an annual shareholders meeting but did not nominate or elect anyone on Board of Management or on the Executive Board. In August of the same year, the bank held an extraordinary meeting to elect senior executives, but failed to achieve any new results. On November 26, Mr. Nguyen Minh Tri resigned from his position as a member of the BOD for the term 2013-2017 because he was no longer an authorized representative of contributed capital of institutional shareholders. At that time, Saigonbank sent a statement to all shareholders about the number of members on the Board of Directors and the Supervisory Board for a new term, expecting to hold an extraordinary General Meeting of Shareholders to elect additional members on Board of Directors and Board of Supervisors for the term 2018- 2023. However, at the 2019 annual shareholders meeting, the issue to elect new members on the Board of Directors was not even mentioned.
Bank falls in own growth trap
Saigonbank was previously known to be among a group of healthy credit institutions and was allowed to restructure itself according to plan approved by the State Bank of Vietnam since 2013. However, the bank activities were not satisfactory and the results were disappointing. In 2015, the bank reservedly set a profit target of VND 50 bn, down 78% compared to VND 230 bn achieved in 2014. In 2016, provision expenses decreased by nearly half, while expenses for operations increased, so profit after tax was only a little over VND 139 bn.
In 2017, the target for profit before tax was VND 270 bn, but Saigonbank only achieved VND 71 bn, down by more than 59% compared to the result achieved in 2016, and only 26% of the target. The bank continued to fall into its own growth trap when planning a high profit of VND 150 bn for 2018, but its performance continued to be very low. For the whole of 2018, profit before tax was only at around VND 52.5 bn, down 26% compared to 2017.
Profits in 2017 and 2018 dropped sharply because of the huge risk provision in previous years. In 2017, provision expense was VND 281.6 bn, accounting for over 72% of pre-provision profit. Of this VND 281.6 bn, more than 72% was used to settling Group 5 debt which was not previously deducted in 2016. In 2018, provision expense reached nearly VND 343 bn, which eroded 87% of the bank profit. Although the ratio of bad debts and outstanding loans in 2018 decreased from 2.98% to 2.2%, by the end of the year, the bank had nearly VND 1,133 bn of special bonds issued by VAMC, an increase of 85% compared to VND 613 bn in the same period a year earlier.
By the end of September 2019, the bank profits before tax were at VND 220.7 bn, an increase of more than 80% compared to the same period in 2018. However, this profit mainly came from sharp reduction of provision expenses. Specifically, in the first nine months of 2019, the risk provision was only VND 54.9 bn, the NPL ratio decreased from 2.2% to 2.03%, but Group 5 debt reached VND 211 bn, accounting for 72% of the total bad debt. Simultaneously, interest and fee receivables at the end of September increased by 39% compared to the end of 2018, to touch VND 219 bn. Instability, inconsistency and very frequent attrition of senior directors is believed to be the cause of operational difficulties and inefficiency in Saigonbank in recent years. Added to this, Saigonbank has not paid dividends to its shareholders for many years.
Due to so much constant attrition among senior executives and constant operational difficulties, many major shareholders have already left the bank. Electronics Joint Stock Company Bien Hoa (Belco) has recently registered to hold an auction in early 2020 of nearly 1.5 million Saigonbank shares, equivalent to 0.49% of charter capital. Previously, when implementing Circular 36 on cross-ownership, two banks, namely, Vietcombank and VietinBank, had divested capital at this bank, then proceeded to divest all the capital.
Currently, Saigonbank has four major shareholders holding 65% of its capital, which includes Ho Chi Minh City Party Committee with more than 18% of capital; Phu Nhuan Construction and Housing Trading Company Limited and Ky Hoa Trading and Tourism Co. Ltd., jointly holding more than 16%; and Saigon Petro holding more than 14%. However, the Ho Chi Minh Party Committee office is expected to divest completely from Saigonbank.