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Banks look for ways to raise capital

The state-owned Vietcombank has received approval from the State Bank of Vietnam’s to raise capital, while BIDV is stepping up implementation of a plan to issue shares to specific shareholders.

Vietcombank will raise its charter capital from VND36 trillion to VND39.5 trillion, or 10 percent.

Meanwhile, BIDV plans a bigger capital increase, 28 percent, to VND43.6 trillion. If the plan is successfully fulfilled, VietinBank will surpass Vietcombank to become the bank with the highest charter capital in the banking system.

Sources said both banks may sell shares to foreign shareholders.

Raising charter capital is a difficult task for many banks, despite the recovery of the stock market and the encouraging achievements of the bad debt settlement process.

As for state-owned banks, their policy on not paying dividends and retaining profits to serve capital raising plan has faced strong opposition from the Ministry of Finance, the representative of the state, the biggest shareholder.

A report from the State Bank showed that the total charter capital of state-owned banks by May 2018 had reached VND147.8 trillion, a slight increase of VND118 billion compared with January 2017. Meanwhile, the charter capital of joint stock banks had increased by VND16.4 trillion.

Since they cannot retain profits to raise charter capital, state-owned banks have to increase their tier-2 regulatory capital through bond and long-term deposit certificates to expand their business while ensuring safe CAR (capital adequacy ratio).

Thanks to the moves, the regulatory capital of state-owned banks had increased by VND19.2 trillion to VND252.5 trillion compared to January 2017. However, their CAR was low, at 9.39 percent in late May.

Joint stock banks also have difficulties when trying to raise capital. An SBV report showed that the charter capital of the banks has increased by VND16.5 trillion.

However, the increase only occurred at large listed banks which have favorable conditions to issue additional shares to existing shareholders or pay dividends in shares. Meanwhile, small banks have to delay their capital raising plans for several times.

At present, eight commercial banks, not including PG Bank, which has merged with HD Bank, still have charter capital at below VND4 trillion.

Of these, Ban Viet and Kien Long have charter capital equal to legal capital, VND3 trillion. National Citizen Bank has VND3.01 trillion, Nam A VND3.021 trillion and Sai Gon Cong Thuong VND3.08 trillion. The other three banks have higher capital: Bao Viet VND3.15 trillion, Viet Nam Thuong Tin VND3.249 trillion and Viet A VND3.5 trillion.

In related news, VietBank is planning to put its shares into transactions on UpCom this year and list shares on the HCMC bourse by 2020. Viet A Bank is planning to enter the bourse this year.

US$1=VND22,000