While bank stock investors are “sitting on the fire” with continuous downtrend from the peak, reports of some securities companies are optimistic with a different view.
Accordingly, the downtrend has brought many “King” shares back to a more reasonable level, facilitating the sale of capital to strategic investors.
In a recent report, Hochiminh City Securities Company (HSC) said BIDV’s capital increase demand is very urgent. However, this bank is struggling to raise its Tier 1 capital, which includes chartered capital and reserve funds, as well as undistributed profits.
“The reason for the delays in raising capital is that stock prices have risen sharply in the past 12 months, leading to high market price for a bank that still has a lot of problems to deal with,” HSC said.
The recent sharp drop in BIDV shares, according to HSC, will help change this. As a result, BID share price dropped nearly 40 percent from the peak at the beginning April, which could be a positive move if it helps draw back investors’ attention.
BIDV is also the only state-owned bank that has no strategic shareholder with 95.28 percent state ownership rate. However, BIDV is only one of many banks that are suffering from pressure before the system applies Basel II standard. With more stringent regulations on how to calculate capital adequacy ratios, not many banks can meet this requirement at present.
In the national report No. 17/191, the International Monetary Fund (IMF) said that the implementation of Basel II for Vietnamese banks would reduce the capital adequacy ratio (CAR) by 2-4 percent. The reduction of the minimum capital adequacy requirement from nine percent to eight percent under Basel II standard will offset previously harsher calculations. However, Viet Capital Securities Company (VCSC) said that bank shares portfolio that this company is monitoring would need at least $5.7 billion in capital.
“We estimate that banks in the monitoring portfolio need at least 124 trillion dong of additional charter capital to comply with Basel II by 2020,” VCSC said.
Earlier in a report at the beginning of March, the company said that low capitalisation and high lending growth made the banking system not to reach Basel II in some cases, though the official applying date is in 2020.
“The major problem is in government-funded banks,” VCSC said. There are rumours of strategic investors buying shares at Vietcombank, VietinBank and BIDV but the price to be approved by the government still seems to be a major obstacle.
Vietcombank’s story is a typical example of the slow sale of capital related to price negotiations. The plan to issue 7.7 percent stake of the bank to the Singapore government’s GIC investment fund since 2016 still cannot be implemented mainly due to this reason.
