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Big banks in Vietnam raise charter capital
Publication Date : 03-04-2014
While some small commercial banks failed to raise their charter capital last year, some major lenders have already approved adding millions of US dollars to their charter capital this year.
This is viewed as a positive sign amidst the current economic turmoil, but it is also a warning of increases in dividend payment sums.
Sacombank plans to hike its charter capital by 1 trillion dong (US$47.4 million) to 14.382 trillion dong($681.6 million) by the end of 2014. The SCB is targeting the addition of 2 trillion dong to make up its charter capital of 14.295 trillion dong ($677.49 million).
VP Bank has obtained approval from the State Bank of Vietnam to increase its charter capital to 6.347 trillion dong ($300 million) from 5.77 trillion dong ($273.46 million).
Oceanbank will raise its charter capital to 5.3 trillion dong ($251.2 million) by the year-end from 4 trillion dong ($189.57 million).
These plans will be implemented by issuing shares to existing shareholders and offering shares on the stock market.
BIDV's deputy general director Can Van Luc told Vietnam Economic Times newspaper that opportunities for success still arose on the stock market because the capitalisation of bank shares constituted a large part of the market's activity.
Industry experts assume that the ongoing attempts to reform the banking system are gradually improving business at credit institutions and restoring public confidence by making it easier to request capital.
However, the head of an HCM City-based bank, which failed to raise its capital last year, pointed out that making the accompanying dividend payment would prove to be more challenging later on.
In a bid to bolster the ailing banking system and liberalise the industry, Viet Nam in February lifted the level of strategic foreign ownership from 15 per cent to 20 per cent, while maintaining total foreign ownership at 30 per cent for local banks.
In fact, amidst growing distress and the pressure of restructurings, banks performing poorly are in critical need of extra capital, which is difficult to gain from local sources.
Small and medium scale banks have showed determination to raise their charter capitals within this year after failing to achieve the goal last year.
The charter capital increase was considered essential for small and medium-sized banks to enhance their financial capacity and competitiveness amid soaring competition and the hastened restructuring progress of the entire banking system.
The minimum legal capital of a credit institution was regulated at 3 trillion dong ($142.8 million), and several banks in the country now had charter capitals at the minimum level or just slightly higher.
Nam A Bank planned to increase its charter capital from its current value of 3 trillion dong ($142.8 million) to 4 trillion dong ($190 million), with the objective of expanding its network along with the development of the entire banking system.
Accordingly, 100 million shares will be sold to the public, which is scheduled to be implemented in the third quarter of this year, at the price of 10,000 dong ($0.47) per share.
Viet A Bank, which currently has a charter capital of 3 trillion dong ($142.8 million), is reportedly seeking the regulators' nod for a plan to increase its capital by 500 billion dong ($23.8 million).
Last month, Bac A Bank increased its charter capital from 3 trillion dong ($142.8 million) to 3.7 trillion dong ($176.2 million).
According to Nguyen Van Dung, the deputy director of the central bank's HCM City branch, the capital increases of small and medium-sized banks were necessary to improve their financial capacity.
However, the process needs to be put under careful consideration, given the decline witnessed in the prices of banking stocks last year, he was quoted by Dau Tu Chung Khoan newspaper.
In addition, the efficient use of the increased capitals was also a cause of concern along with rising pressure from the stakeholders about dividends, he pointed out.
While several banks planned to use their increased capital for network expansion, the central bank last year raised the standards for network expansion.
As per the regulations, banks keen on expanding their network must meet the requirements of a bad debt ratio at below 3 per cent and set the required capital for setting up a branch in Hanoi and HCM City at 300 billion dong ($14.2 million) and 50 billion dong ($2.3 million) for a branch in other locations.