Banks continuously plan to raise charter capital in 2016

24-Mar-2016 Intellasia | Bao Dau Tu | 6:00 AM Print This Post

Numerous small to large banks are planning to increase charter capital in 2016. The Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) will hold the 2016 annual shareholders’ meeting on April 15th. One of the content of the meeting is to approve the charter capital raising plan in 2016.

Le Thi Hoa, member of Vietcombank’s Board of directors said that the bank is preparing to conduct a private placement at ratio of 10 percent, or even 20 percent of the charter capital. The charter capital raising plan of Vietcombank in 2016 will be implemented in two forms, including issuing primary shares at ratio of 10 percent of charter capital to foreign investors and issuing bonus shares at ratio of 35 percent of charter capital. Mizuho continues to hold at least 15 percent charter capital of the bank.

Charter capital increase is not included in the planned annual shareholders’ meeting of the Commercial Joint Stock Bank for Industry and Trade of Vietnam (Vietinbank). However, the merger with Petrolimex Group Commercial Joint Stock Bank (PGBank), which will be completed in the second quarter of 2016, will help the bank realise its plan to raise charter capital to 49 trillion dong. Although this plan was set in 2015, but it could not be done as the merger deal is implemented slower than planned.

After officially increasing charter capital via the completion of the merger deal with Mekong Housing Commercial Joint Stock Bank (MHB) in 2015, the following plan to raise charter capital of Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) has not yet been revealed. However, when talking to reporter of Bao Dau tu, BIDV’s Chair Tran Bac Ha said that the bank expected to sell stake to a foreign strategic investor in 2016. The market has been waiting for this major deal for years, but until now it has not yet been disclosed.

While large banks have continuously planned to raise charter capital, small banks have also quietly followed the trend. From late 2015 to the present time, many banks have announced their charter capital increasing plan and expected shareholders’ approval on the plan to issue additional shares in the annual shareholders’ meetings this year.

Specifically, Saigon Commercial Joint Stock Bank for Industry and Trade (Saigonbank), in the last week, received approval from the State Bank of Vietnam (SBV) to increase charter capital from 3.080 trillion dong to 4.080 trillion dong. The specific plan has not been revealed. SBV directed that the offering plan of Saigonbank must comply with the regulations. In the case where the issuance leads to ownership of over five percent of charter capital, Saigonbank must propose SBV for approval in accordance with regulations.

For Vietnam Prosperity Commercial Joint Stock Bank (VPBank), after the smooth capital increase stages in 2015, the bank has sent official document to consult shareholders on the plan to increase charter capital to over 10 trillion dong via the private offering of 100 million preferred shares to investors in 2016. This plan is expected to be submitted to the Shareholders’ Committee for approval on March 28th 2016.

Previously, in late 2015, the charter capital raising plans of many other banks such as Bac A Commercial Joint Stock Bank (BacABank), Orient Commercial Joint Stock Bank (OCB) and Vietnam International Commercial Joint Stock Bank (VIB), etc. were approved by SBV.

According to bank leaders, since the stock market and the macro economy have shown signs of recovery, the issuance of shares to increase charter capital is fairly favourable. In addition, capital raising will also help banks better develop credit activity, particularly medium and long-term lending.

Nevertheless, experts believed that increasing charter capital not only helps banks expand the credit limit for customers, supplement the lending funds in the medium and long terms, and contribute capital to buy shares, etc. but also is an essential requirement for banks to meet the risk management standards which have been increasingly stringent.

Under Basel II standards, many banks (out of the 10 banks which pilot the application of Basel II in Vietnam) need to increase charter capital in order to meet the new requirement for the capital adequacy ratio (CAR). The research group of Vietcombank Securities Company (VCBS) said that since the current CAR of commercial banks will decline significantly when applying Basel II standards, raising charter capital seems to be mandatory.

According to estimates, the application of Basel II may result in the reduction of CAR of banks by 10 to 20 percent. Meanwhile, the CAR of many banks, including major banks, are currently just nine to 10 percent (the minimum limit is nine percent).

Talking to Bao Dau Tu Online, deputy general director and Head of the Risk Management Department at Vietinbank Bui Nhu Y confirmed that the pressure to increase charter capital to improve CAR is obvious. She believed that Basel II offers strict capital requirements to motivate banks to improve the quality of risk management, bringing the applications of the risk management into the business operation of banks in order to ensure safe and healthy development. This is the biggest goal and value when applying Basel II, Y added.

In the context of limited resources in the domestic, increasing capital is not easy. For those banks which do not have foreign strategic investor such as BIDV, finding a strategic partner is perhaps the most feasible plan to raise capital. Meanwhile, for banks which have foreign strategic investors, expanding room for foreign investors is an expectation. This is the reason why not long ago, leaders of Vietinbank and Vietcombank simultaneously proposed the government to loosen room for foreign investors.

 


Category: Finance, Vietnam

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