StockNews - OCBC to buy 10% stake in Vietnam Bank

Singapore's smallest bank, OCBC have made inroads into Vietnam through its purchase of 10% of VP bank. OCBC would be able to raise its stake in the bank up to 20% and this latest acquisition comes after its purchase of Indonesian Bank NISP last year. The purchase price of VP Bank comes up to 4.2 times of book value, but at this price it allows OCBC to gain access into the heavily regulated banking industry in Vietnam. With Vietnam's economic growth increasing at a steady pace, OCBC looks to open more branches in Vietnam and increase its association with VP Bank.

Banks in the region have made acquisition declarations starting with Public Bank taking over a small family-owned bank in Hong Kong, and the takeover of Southern Bank by Bumiputra-Commerce. Overall, there seems to be more consolidation to be seen within the Asian banking industry and on top of that we could also expect the larger banks like DBS to make acquisition offers like its intention to buy Korean Exchange Bank. However one trend of observed is the high prices being offered for this takeover. DBS takeover of Dao Heng have resulted in the accounting charge which resulted in DBS announcing the lowest profit figures for FY 2005. Similarly, a high price paid for banks now due could potentially be disastrous in the event of an economic slowdown.