When the application of the Basel II is approaching, the pressure to meet higher standards of capital is weighing on banks. Capital raising process will be one of the main contents discussed at the shareholders’ meeting.
The State Securities Commission has just issued a certificate of registration of offering shares to the public to National Citizen Bank (NCB). The total number of shares offered in the next issue of NCB is 199.44 million units.
In particular, the Bank offered 184.6 million shares to existing shareholders and issued 14.88 million shares to employees. Total offering value is 1,994.4 billion dong of par value. NCB’s chartered capital currently reaches 3,010.2 billion dong. With the successful issuance, it will raise to more than 5,000 billion dong. The issuing consulting organisation is Everest Securities Company.
On March 28, LienViet Post Joint Stock Commercial Bank (Lienviet Post Bank) will conduct the 2019 Annual general Meeting in HCM City. In addition to the contents such as the report on the operation situation in 2018 and the business plan for 2019, the profit distribution plan, LienViet Post Bank will consult shareholders about the plan of issuing shares to increase charter capital and go listed on Hochiminh Stock Exchange (HOSE).
Last year, LienViet Post Bank’s general Meeting of Shareholders approved a plan to increase its chartered capital to over 10,300 billion dong by issuing nearly 287 million of LPB shares to existing shareholders and employees. However, the plan was unsuccessful and by the end of 2018, the bank’s charter capital was only 7,500 billion dong. In 2018, the Bank’s pre-tax profit reached 1,213 billion dong, (down 31.4 percent compared to 2017), which, however, exceeded the set target (1,200 billion dong).
Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) said it would hold its annual general Meeting of Shareholders in 2019 on April 26. One of the most remarkable contents in this meeting was the report on the plan to increase charter capital in 2019.
By the end of 2018, the bank had issued 111.1 million of private VCB shares for 55,510 dong per share to Mizuho Bank and GIC from Singapore. This deal helped Vietcombank mobilise 6,167 billion dong. However, the number of shares distributed was only 30.88 percent of the total number of shares as expected.
For the capital increase in 2019, it is possible that Vietcombank will carry out a private issuance or will submit to shareholders a plan to increase capital from owner’s equity (bonus share distribution) or pay dividends in stocks. Vietcombank’s undistributed after-tax profit as of 2018 reached 19,438.6 billion dong. However, stock dividends are not easy.
In fact, not only Vietcombank but also many other state-owned banks such as Vietnam Joint Stock Commercial Bank of Industry and Trade (VietinBank) and Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) always mentioned the capital raising problem. One of the proposed contents is to allow banks to pay dividends in shares, instead of cash as in the previous years, but this is not easy to do due to the requirement to collect cash dividends from the government agencies.
The time to meet Basel II standards is approaching and the roadmap of the State Bank of Vietnam (SBV) is proposed that by 2020, Vietnam’s banking system must have 12-15 banks meeting Basel II standards.
Accordingly, the requirement to ensure the minimum capital adequacy ratio (CAR) and enhance the competitiveness in the system, increase the pressure on raising capital of banks, especially in small banks with charter capital from 3,000 to 5,000 billion dong.
According to Vietnam Thuong Tin Joint Stock Commercial Bank (VietBank)’s Board of directors, the Bank has submitted the application file for stock trading to Unlisted Public Company Market (UPCoM) and will trade shares on this market within one year after completing the increase of charter capital with the stock code VBB.
VietBank has just issued 100.7 million shares to increase its chartered capital before preparing to UPCoM.
Tien Phong Joint Stock Commercial Bank (TPBank) on December 10, 2018 has closed the list of shareholders to pay dividends in shares and share bonus to existing shareholders with a total ratio of 28 percent. After the issuance, the Bank’s chartered capital is expected to increase to 8,566 billion dong.
To increase charter capital, improve financial capacity, the problem of attracting foreign capital is considered by many banks, in which there is no exception to state-owned banks.
Nam A Joint Stock Commercial Bank (Nam A Bank) said that the bank would continue to carry out the capital-raising plan to 5,000 billion dong this year, including a plan to attract more capital from foreign strategic shareholders. BIDV also revealed plans to offer 603 million shares to foreign strategic shareholders of KEB Hana Bank.
Trinh Van Tuan, Chair of the Board of directors of Orient Joint Stock Commercial Bank (OCB) said that OCB would close the sale to foreign investors before listing on the HOSE in 2019.
OCB has only one foreign shareholderVinaCapital (accounting for five percent of the shares). OCB is currently in the process of finalising listing documents.
Financial analysts said that in the 2019 shareholders’ meeting season, banks continued to strongly pay share dividends to increase capital and attract more foreign capital, in order to improve financial capacity and meet Basel II standards.
However, with current market conditions, to mobilise large capital is not easy for banks, so many banks may have to consider the plan to increase capital through share dividends.
