The race to increase capital continues

06-Mar-2021 Intellasia | Thoi bao Kinh doanh | 6:49 AM Print This Post

It seems that the race to raise capital and improve the financial capacity of banks has never ended and even become hotter when the Vietnam Europe Free Trade Agreement (EVFTA) takes effect and the banking industry is increasingly complying with the application of international standards.

Last week, Viet Capital Commercial Joint Stock Bank (VietCapitalBank) made announcement on the issuance of 15 million shares under the Employee Stock Ownership Plan (ESOP), equivalent to the issue rate of 0.0473%. Once completed, VietCapitalBank’s charter capital is expected to increase to 3.321 trillion dong.

At the beginning of the year, the State Bank of Vietnam (SBV) approved Saigon Commercial Joint Stock Bank (SCB)’s plan to increase capital by a maximum of five trillion dong from 15.231 trillion dong in the form of issuing shares to existing shareholders. Thus, after raising capital, the charter capital of SCB will be more than 20.230 trillion dong.

At the conference on the 2021 business strategy held recently, National Citizen Commercial Joint Stock Bank (NCB) also decided to increase charter capital to seven trillion dong by using shares to employees and existing shareholders.

From the beginning of the year until now, many banks have announced their capital raising plan. In particular, in addition the plan to increase capital through the issue of shares, many banks expect to sell shares to foreign strategic shareholders.

For example, Nam A Commercial Joint Stock Bank (NamABank) implements a plan to increase charter capital to seven trillion dong, including a sale of capital to foreign investors at the prescribed rate.

Recently, Orient Commercial Joint Stock Bank (OCB) said that it will sell another 10 percent of stake to foreign investors after the completion of the deal to sell 15 percent of stake of Aozora one of the most effective banks in Vietnam in June 2020.

Representative of Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) said that the bank is about to sell 4.99 percent of capital to foreign investors. Currently, many foreign investors want to buy, but the bank’s leader board is looking for a suitable investor. This deal is expected to be completed in 2021, the minimum negotiation time is no less than six months.

Previously, SCB also said that the bank was in the negotiation process with foreign strategic partners to sell a part of its capital to enhance the financial potential after completing the restructuring and listing on the stock market.

In fact, the process of negotiating with foreign partners takes a lot of time. In addition, the Covid-19 pandemic has also made it more difficult to find partner.

In 2020, in the field of mergers and acquisitions (M&A), there was only the deal of OCB (which sold 15 percent of stake to Aozora Bank (AOZ from Japan) carried out in mid-June 2020. According to OCB’s Chair of the Board of directors (BOD) Trinh Van Tuan, the bank had worked with many partners an AOZ for more than two years.

Dr Nguyen Anh Tuan, deputy general director of Investment at Dragon Capital said that banking and finance is still considered an area drawing the attention of foreign investors. However, the maximum room for foreign investors in this field of just 30 percent is a barrier to attract capital from foreign investors.

According to the provisions of Decree 01/2014/ND-CP, the share ownership ratio of a foreign strategic investors must not exceed 20 percent of the charter capital of a Vietnamese credit institution and the total ownership rate of all foreign investors in a domestic credit institution must not exceed 30 percent of charter capital.

Currently, many Vietnamese banks have sold capital to foreign investors. For example, Asia Commercial Joint Stock Bank (ACB) has run out of foreign ownership room. HCM City Development Commercial Joint Stock Bank (HDBank) has sold more than 21 percent of stake to more than 10 foreign investors. Vietnam Technological and Commercial Joint Stock Bank (Techcombank) has sold 22.5 percent of stake to foreign investors. Vietnam International Commercial Joint Stock Bank (VIB) has finalised the foreign ownership room from 20.5%, in which the bank’s foreign strategic shareholder CommonwealthBank of Australia holds 20%. Vietnam Prosperity Commercial Joint Stock Bank (VPBank) has also sold 15 percent of capital to foreign partners.

However, many banks still have full foreign ownership room available. That is not to mention the restructuring banks or the three “zero” dong banks, in which foreign partners can buy 100 percent of capital with the consent of the government, so the opportunity is open to investors.

On the other hand, according to the EVFTA, European banks will be able to increase their shareholding rate in two Vietnamese banks to a maximum of 49 percent without having to wait for a room expansion decision. This commitment does not apply to the four banks with dominant state capital (including Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), Commercial Joint Stock Bank for Foreign Trade of Vietnam, and Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank).

According to the Vietnam Investment Securities Company (IVS), VIB, VPBank, Techcombank and ACB are the potential candidates to be considered for foreign ownership room loosening as proposed by European banks under the EVFTA.

 

Category: Finance, Vietnam

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