Ktetaichinh’s Blog

December 10, 2009

Banks worried about capital increase

Filed under: Uncategorized — ktetaichinh @ 6:53 pm

VNBusinessNews.com – In June 2009, State Bank of Vietnam (SBV) governor proposed the permission of prime minister to define the authorised capital increase roadmap of commercial joint stock banks. The estimated capital threshold concerned in the proposal is that member banks must ensure the minimum chartered capital of two trillion dong by December 31, 2009.

Other information on the proposal has not been announced. SBV also did not have any detailed document ruling on above proposal. But according to the government’s Decree No 141/2006/ND-CP, the authorised capital of joint stock banks by 2008 must be one trillion dong and at three trillion dong at the end of 2010 at latest.

There are twenty days left for the year end. If defining the threshold of December 31 at two trillion dong proposed in June by SBV, surely many banks could not meet. Like in 2008, remaining four banks have not finished the ruled authorised capital of one trillion dong.

Twenty days are the too short time for small sized joint stock banks to carry out the previous capital increase plan. Between March and April when the shareholder meeting season blossomed, many banks including OCB, VietABank, KienLongBank, Western Bank and HDBank in turn raised the chartered capital to two trillion dong or even three trillion dong for the whole 2009.

At this time, it is confirmed that most plans to seek and issue shares to foreign strategic investors for capital increase could not be conducted, except for OCB. The capital threshold of two trillion dong has not been reached by a lot of banks despite these banks plan to offer extra shares or convertible bonds.

Towards 2010, the ruled level of three trillion dong in authorised capital is coming. The majority of banks rejected to answer after being questioned about their capital increase for the next year because the 2009 plan has not been done.

Most bankers forecast that capital increase in 2010 will be very difficult because none of small banks can manage to raise capital from one trillion dong up to three trillion dong. The tenseness of capital of 2008 will be expanded to 2010.

Apart from the difficulties of market as for share offerings, small banks will be hard to become big shareholders at other commercial banks because according to amended draft Law on Credit Institutions proposed, commercial banks are disallowed to invest in another bank.

Meanwhile, the Central Bank also is in the completion process to issue a guidance document on the merger and acquisitions relating to credit institutions.

This year a lot of commercial banks continued hiking chartered capital, mainly the giants of ACB, Sacombank, Eximbank, Techcombank Military Bank and VIB Bank, in order to meet the requirements of new development steps. But these banks had to make much big effort to carry out the capital increase.

Typically, VIB Bank plan to increase capital strongly. Through three adjustments, chartered capital of VIB till December 31 is estimated at four trillion dong, a double-fold against the year early. The newly increased capital will be invested in infrastructure, technology and human resources, short, medium and long term credit, contribution to joint ventures, development of services and non-credit activities and trade name expansion.

However, the hardship of banks as using new capital source is investment efficiency. Network expansion could not be shown everyday while many shareholders still required high dividend.

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