Despite the difficulties caused by the Covid-19 epidemic, the wave of banks’ capital increase continues to be exciting because the increase in charter capital will help banks improve their safety ratios according to Basle II, while ensuring the goal of business growth and expansion.
For example, Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) has recently been approved by the State Bank of Vietnam (SBV) to raise its charter capital from more than 8.881 trillion dong to over 9.769 trillion dong by the dividends in shares in 2018.
Orient Commercial Joint Stock Bank (OCB) has also received approval from the management agency to increase charter capital from 7.898 trillion dong to 8.767 trillion dong via a private placement of shares to foreign investors.
Military Commercial Joint Stock Bank (MB) has made announcement that the bank has completed raising capital by offering private shares on February 26th and collected over 1.7 trillion dong. Previously, right at the beginning of the year, many banks had been approved by the regulatory agency to increase their charter capital, such as Viet A Commercial Joint Stock Bank (VietABank) which raised capital from nearly 3.5 trillion dong to five trillion dong, Nam A Commercial Joint Stock Bank (NamABank) which raised charter capital from 3.890 trillion dong to five trillion dong, etc.
For state-owned banks, raising capital is their urgent requirement. The annual general meeting (AGM) of Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) has recently approved a plan to increase its charter capital by an addition of 2.815 trillion dong. This new capital raising plan will be implemented by public auction or private placement to institutional investors. It is expected to be in the second half of 2020 according to the SBV’s approval.
Earlier, not only banks but also the whole market were excited at the news that the government would increase the charter capital by about 10 trillion dong for Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) and Commercial Joint Stock Bank for Industry and Trade (VietinBank). For Agribank, the entire profit contributed to the budget in 2020 will be used to increase charter capital. However, there is no far no further information. One of the cause is said to be the result of the Covid-19 pandemic. According to the analysis group of KB Securities (KBSV), the Covid-19 pandemic from the beginning of 2020 has not only impacted on the domestic economic growth, profits of listed companies but also significantly affected the government’s plans on state-owned enterprises equitisation and divestment, and capital increase of state-owned banks.
BIDV’s Chair of the Board of directors (BOD) Phan Duc Tu said that increasing capital is one of the prerequisites for credit institutions (CIs) to satisfy the safety indicators as well as increase resources for economic development. general director of Saigon Hanoi Commercial Joint Stock Bank (SHB) Nguyen Van Le said that the supplement capital will help the bank improve its facilities, modernise equipment and technologies for administration. In addition, the bank will be able to develop new and diversified products and services to meet the competitive requirements in the context of the challenging situation of the banking system at the present time, etc.
It can be seen that capital increase is one of the top priorities of banks to improve capital adequacy ratio (CAR) to meet Basel II standards. There are still many banks that have not yet reached the CAR under Basel II, while CAR requirement is only one of the three pillars of Basel II.
Han Ngoc Vu, general director of Vietnam International Commercial Joint Stock Bank (VIB) the first bank to complete all three pillars of Basel II, shared that the bank considered the completion of all three pillars of Basle II as one of the important tasks in its long-term vision of risk management. The bank’s representative also said that in 2020, the bank will continue to invest the application of Basel II under advanced approach, and step by step apply Basel III standards in risk management. The bank expects to complete Basel III standards by 2022. According to Vu, in order to apply all three pillars of Basle II, each bank must be determined and have the consensus from management levels to the units. There should be considerable investment in resources, transformation of management thinking, technological system, and traditional business processes and structures.
Nevertheless, experts also recommended that the capital increase should be based on the actual operational situation and financial health of each bank in order to have the most appropriate plan for the bank. In general, raising capital must be substantial, and in order to do so, banks’ profits must grow, along with risk management, bad debt reduction, and increase in non-credit service revenue, etc.
CEO of a foreign bank saw that the Vietnam’s banking system is still in the process of restructuring, and the participation of private economic sector is very important. When attracting capital from foreign investors, banks not only have a new source of capital but also can solve the problem of lending and ensure transparency in business activities.
