The equity growth of banks is slower than the growth rate of total assets in 2017. Therefore, the pressure of capital growth will be higher in 2018, especially when Basel II deadline approaches.
At the 2018 annual general meeting (AGM), Nguyen Van Le, CEO of Saigon-Hanoi Joint Stock Commercial Bank (SHB) said in the plan for 2018, the bank’s chartered capital will increase to 13.240 trillion dong (18.25 percent) in order to increase financial capacity, competitiveness, and ensure the compliance with capital safety ratios to meet the demand for expansion of credit growth scale and investment operations.
At the end of last week, the management board of the Bank for Investment and Development of Vietnam (BIDV) submitted and was approved by the AGM with quite strong capital increase plan this year. Specifically, the bank is expected to raise the capital from 34.187 trillion dong to 43.638 trillion dong, equal to 28 percent.
TienPhong Joint Stock Commercial Bank (TPBank) also has strong chartered capital increase in 2018 with 46 percent, standing at 8.566 trillion dong. At Vietnam Prosperity Joint Stock Commercial Bank (VPBank), the management board approves the plan to increase capital to as much as 77 percent right in 2018, to over 27.799 trillion dong.
In fact, the chartered capital increase has been strengthened by banks such as BacA Bank, HDBank, MB, VPBank, ACB, etc. since the end of 2017, especially the end of that year. However, according to the National Financial Supervisory Commission (NFSC), as of the end of 2017, the system’s Capital Adequacy Ratio (CAR) only touched 11.1 percent; lower than in 2016 with 11.6 percent.
Dr Nguyen Tri Hieu, economic expert said after the restructuring and bad debt settlement period, along with the development of the economy, commercial banks are entering a new phase of development. In the context that the economy is still dependent on bank capital, in order to have sufficient capacity for lending, banks must increase chartered capital.
“The growth rate of banks’ equity is slower than the growth rate of total assets in 2017, so the pressure to raise capital will be higher in 2018, especially when Basel II deadline is approaching”, said Dr Hieu.
Ngo Chi Dung, Chair of VPBank said as of the end of 2017, the bank’s equity amounted to 29 trillion dong. If new shares are issued, the CAR will just reach 18 percent. Meanwhile, in 2017, after the bank raises capital to 15.7 trillion dong, the CAR only touched 14.6 percent and 12.6 percent following Basel II, meeting the requirement of Circular No.41 on minimum safety ratio at eight percent.
“Though the State Bank has not required VPBank to apply Basel II, the bank itself has been proactive in raising capital to meet Basel II”, said Dung.
So, in the context that foreign strategic investors at many credit organisations have left, are domestic investors forced to have real source of money to increase capital? Le told the local Newswire Dau Tu Chung Khoan (or Securities Investment) that “After raising chartered capital by making dividend payment by shares by over 1.203 trillion dong, SHB’s chartered capital is expected to be more than 13.239 trillion dong”.
The capital raising plan has been approved by TPBank’s AGM with the total additional issuance to shareholders at 28.37 percent, including the dividend payment in shares at 8.37 percent and bonus distribution from the capital surplus at 20 percent. In 2017, TPBank’s profit surged 80 percent, exceeding 1.2 trillion dong, helping to accumulate a significant source of non-distributed profit, thereby this bank may have been able to make dividend payment at rather high ratio compared to the overall level of banks. Apart from dividends, TPBank’s shareholders also receive the bonus shares at 20 percent.
After many unsuccessful capital sales to foreign investors, BIDV continues to focus on this plan. Specifically, the bank’s board of directors set out three implementation methods: first, BIDV will offer to the public or separately offering more than 170.9 million shares (five percent stake). The expected implementation time will be in 2018-2019.
Second, the bank will issue to foreign investors more than 603.3 million shares.
Third, shares will be issued under the selection programme for labourers at 170.9 million shares (equal to five percent of chartered capital).
Vietinbank’s CEO Le Duc Tho said over the last five years, despite no chartered capital increase, the bank still ensures capital safety ratios under the regulations of the State Bank on the basis of carrying out many measures to raise the equity, including the issuance of secondary bonds. Reportedly, the bank issued 4.2 trillion dong bonds in 2017 and may continue issuing this year.
Tho said “We realised that the remaining room to increase capital at the end of 2017 was not much, so we had to consider raising capital from shareholders. The bank’s management board has repeatedly proposed to make dividend payment by shares but that is not able to become real with the current regulation, and is hoped to be done later. We have also submitted a scheme to the State Bank to raise capital in the near future”.
