Joint stock commercial banks are scrambling to beef up chartered capital to secure a footing in the competitive banking market and they are going about it in different ways.
The country’s largest, Saigon Thuong Tin Bank (Sacombank), announced last week it had increased its equity by 64.4 billion dong to 740 billion dong (US$47 million).
It raised the additional amount through a fresh share issue to its existing institutional investors, including the World Bank’s International Financial Corp and Britain’s Dragon Financial Holdings.
The two foreign investors hold a combined 20% out of a permissible 30% in Sacombank.
“We will seek 10% cash from foreign investors to raise foreign ownership to 30% by this year,” the bank chairman Dang Van Thanh said.
“We want to see more foreign shareholders investing in the bank, not only for raising out chartered capital but also to highlight the bank’s image and improve its business,” Thanh said.
Sacombank plans to enhance its capital further to US$52 million by 2005 and US$100 million by 2010.
Asia Commercial Bank (ACB) said it would use profits to raise capital by an average 50 billion dong (US$3.2 million) annually unit 2005. Its chartered capital now stands at 481 billion dong (US$30.6 million).
“We plan to plough back the profits after paying dividends so that the capital is at least 550 billion dong (US$35.4 million) by the end of this year,” said ACB general director Pham Van Thiet.
The bank also plans to list on the bourse to raise funds. “The stock market is the most appropriate channel for a healthy business to raise a large sum of money,” Thiet said.
“When foreign rivals come to Vietnam, domestic banks will have to increase their capital or else see their market share shrink, Thiet warned.
Nam A Bank plans to attract 80 billion dong (US$5 million) through a two-phase offering of new shares that would more than double its chartered capital.
By mid-November, 30,000 shares will be offered to the bank’s shareholders and employees at their one million dong face value. In the second phase, 50,000 shares, whose price has not been determined, will be issued to the public.
Hoang Van Toan, Nam A Bank’s general director, said he hoped the bank could raise its capital to 150 billion dong (US$9.5 million) in this manner by the end of this year.
Joint-venture banks are following suit. Indovina Bank, for instance, has increased its chartered capital by US$5 million to US$25 million, becoming the joint-venture bank with the highest capital.
The increase would enable the bank to expand its loans, the bank’s first deputy general director Pham Dao Vu said.
Banks are prohibited by law to lend more than 15% of their registered capital to a single client. The recapitalisation will also “allow us to loan more money to any customer,” Vu said.
Indovina Bank is a 50/50 venture between the Industrial and Commercial Bank of Vietnam (Incombank) and Taiwan’s United World Chinese Commercial Bank.
Other players like Vietnam International Bank, Vietnam Technical and Commercial Bank (Techcombank), Military Bank, Eximbank, East Asia Commercial Bank, Phuong Nam Bank and HCM City Housing Development Bank are also planning to increase capital.
However, banking experts warn capital increases will cut both ways with many banks finding the pressure of making dividend payments too great.
“Banks should consider capital increase carefully,” an specialist cautioned.