Small banks suffer from capital increase pressure

11-Nov-2017 Intellasia | DTCK | 6:00 AM Print This Post

Although the annual general meeting (AGM) season has passed for quite a long time, so far, shareholders of VietBank are still longing for the meeting.

Earlier, in mid-April 2017, VietBank announced the date of convening shareholders for the meeting but then cancelled. Although the AGM had not been organised, VietBank unexpectedly announced to organise the extraordinary shareholders’ meeting at the end of October 2017 to elect additional members of the Board of directors for 2016-2020.

However, as per the latest announcement, VietBank postponed the organisation. The specific date of organisation is subject to the decision of the Chair of the Board, depending on the time the State Bank approves the application for election of additional members for the Board of directors as well as the compliance with the information disclosure time as prescribed in the law on securities.

Vietbank’s management board now has seven people, including Dang Ngoc Lan, wife of the former ACB Chair Nguyen Duc Kien.

In terms of business results in 2016, VietBank earned 69.6 billion dong pre-tax profit, fulfilling just more than 25 percent of the profit target (this bank also continuously reported losses in many previous years).

As of the end of 2016, VietBank had total consolidated assets of 36.698 trillion dong, total capital mobilisation of 30.182 trillion dong, outstanding loans of 26.313 trillion dong and non-performing loan (NPL) ratio at 1.7 percent.

Currently, VietBank’s chartered capital touched more than three trillion dong, slightly higher than the legal capital. VietBank plans to increase capital to 4.2 trillion dong in 2017 through the 2016 dividend payment at 10 percent in shares. However, so far, this plan is still inactive. In the previous years, VietBank had capital increase plan for each year but could not carry out, or just a bit (if available).

Targets that VietBank planned to submit to the 2017 AGM included the total assets of 46.009 trillion dong (up 25 percent from 2016); the capital mobilisation of 37.836 trillion dong (up 25 percent); the outstanding loans of 29.053 trillion dong (up 10 percent). However, the pre-tax profit was set at only 35 billion dong, down nearly 50 percent; the non-performing loan (NPL) continued to stay below two percent.

While a series of medium and large scale banks have continuously reported trillions dong of profit, VietBank is not the only case. Many banks such as Saigonbank, Viet Capital Bank, VietA Bank, etc. are also “shrinking”.

Saigonbank is mentioned not because of business achievements but because of large pressure from the capital divestment of strategic shareholders as well as the risk of merger.

In fact, over time, there has had a lot of information that Saigonbank will “share the same home” with Vietcombank. However, Saigonbank’s major shareholders have not agreed to merge so this bank still has had to self-restructure so far.

After the AGM was organised in the middle of June 2017, Vietcombank unexpectedly announced to divest. On November 20, Vietcombank will auction the contribution of 132.5 billion dong, equal to 4.3 percent chartered capital at Saigonbank with the starting price of 12,550 dong per share. The auction is organised at Hanoi Stock Exchange (HNX).

Earlier, another large shareholder i.e. Vietinbank successfully divested more than five percent stake at Saigonbank to reduce the ownership rate of Saigonbank’s voting share from 10.39 percent to 4.91 percent.

Moreover, these banks also have no sign of bringing shares to trade on Upcom as required or have any specific move to increase the chartered capital scale.

As per industry experts, this situation is because the current sanction just stops at “warning”, so banks will not make efforts to bring stocks to transact on the bourse. Therefore, many experts said stricter sanctions are needed.

 


Category: Finance

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