A separate capital increasing mechanism for each bank appears to be urgent

27-Oct-2020 Intellasia | Dien dan Doanh nghiep | 6:02 AM Print This Post

Although the benefits of raising capital for state-owned banks were evident, the Big Three listed itself had foreign partners. Was it adequate to use the budget to raise capital for these organisations?

Finance expert Nguyen Le Ngoc Hoan said that the regulator should had a specific capital increase mechanism for each bank with state capital unless there were no other options. For example, Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) had planned to increase capital right after Decree No. 121 was issued. However, the capital adequacy ratio (CAR) was still low, and the bank could not sell additional capital to foreign partners.

Nevertheless, using the budget to increase banks’ capital at a ‘cushion’ period was still temporary, reluctant. These banks were then responsible for sharing with the economy. Moreover, in the source of profits earned, more than 64 percent of Vietinbank’s controlling interest also contributed to the State shareholders and the bank. Therefore, keeping or injecting was actually a partial redistribution. In the long term, a more feasible and sustainable direction was that SBV should consider pushing the divestment of equity lower and earlier than the roadmap. After raising capital thanks to the budget, the foreign ownership rate would be more open, plus a small amount because IFC had sold CTG shares. It should even be considered to add a more attractive increase, Hoan emphasized.

Similarly, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) also had the capacity to negotiate with foreign partners. Therefore, choosing the time and balance between the market price and the reasonable price to get useful resources for the bank to raise capital would be practical and reasonable.

With Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) leading the system in terms of profit, to increase credit by up to 10 percent and having plenty of capacity to continue to expand lending, the expert said that it was necessary to facilitate and promote capital raising plans according to the roadmap of dividends for 2018, offering 6.5 percent of shares through private placement to foreign partners.

 

Category: Finance, Vietnam

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