The effects of merger and acquisition on performance of commercial banks in Vietnam - The case of Sai Gon - Ha Noi commercial joint stock bank (SHB) and Ha Noi building commercial joint stock bank (HABUBANK)
Abstract
This study examines the financial performance of a listed commercial bank in Vietnam
namely Saigon Hanoi Joint Stock Commercial Bank (SHB) in its merger with Hanoi
Building Commercial Joint Stock Bank (HBB). By using two methodology approaches,
the event study method and ratios analysis, we figured out that there were no synergy
created from the effects of merger announcement. Specifically, event study revealed that
SHB tended to suffer from negative Abnormal Returns (ARs) and negative Cumulative
Abnormal Returns (CARs) in post-merger deal. These were because of the risks facing
merging bank as investors’ views in terms of decreasing asset quality (NPLs/ Total loans,
NPLs/ Total Equity, and Provisions for loan loss ratio), questioning management ability
(Asset growth rate, Earning growth rate, and Cost to income ratio), and degrading profit
(NIM, ROA, ROE) after merger. Indeed, the ratios associated with each category listed
above show adverse directions compared with that before merger. Also, there was
information leakage about the legal validation of the SBV approving for this merger
transaction. In general, disadvantages suffered by merging bank seem overweight
advantages after announcement.
Key words: Merger and Acquisition, Synergies, Event Study, Ratios Analysis, Financial
Performance.