The analysis group of KB Securities Vietnam (KBSV) has recently mentioned that the level of integration and openness of Vietnam’s economy is now completely different from the SARS period. The impact of the Covid-19 epidemic on the Vietnam’s stock market developments will certainly be much greater.
KBSV stated that the Covid-19 epidemic has not only caused greater impacts on the domestic economic growth and the profit growth of listed businesses, it has also affected equitisation and divestment plans of state-owned enterprises (SOEs) and the capital increase for state-owned banks of the government.
According to this view, the capital raising of state-owned banks may be delayed again.
Meanwhile, at the meeting in early spring at Military Commercial Joint Stock Bank (MBBank), deputy prime minister Vuong Dinh Hue said that in the first quarter of 2020, the government will increase the charter capital of Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) and Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) by about 10 trillion dong. As for Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank), all profits contributed to the budget in 2020 will be used to increase the bank’s charter capital.
For VietinBank’s case, Governor of the State Bank of Vietnam (SBV) Le Minh Hung said that earlier this year, the government had a policy to increase charter capital for VietinBank by allowing the bank to retain all profits in 2017 and 2018. The Ministry of Finance is currently completing a Decree to report to the government.
However, the first quarter ends in about two weeks, and there is no new information about the capital increase.
In fact, the increase in capital is required to help banks ensure capital adequacy ratio and have room to develop credit. Nevertheless, instead of worrying about running out of credit growth room as in previous years, banks are facing many difficulties in expanding credit. Despite offering preferential credit packages, the credit growth of banks in the first two months of 2020 was only 0.06%, the lowest level in the last six years. Many bank leaders also said to encounter difficulties when businesses have no need for loans.
Chair of Vietcombank’s Board of directors Nghiem Xuan Thanh said that in recent time, the bank’s credit growth is approximately equal to that of the whole industry and the bank is still accelerating lending. People often have little need for loans in the first months of the year. On the other hand, the Covid-19 epidemic also affects business activities, indirectly affecting the credit demand of these customers.
Meanwhile, the credit growth at Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) was negative two percent, and mobilisation growth fell by 1.6%. Chair of BIDV’s Board of directors said that this is the common trend of banks at the present time, due to the dual impact of the Covid-19 epidemic and the needs of people
Thus, in the current context, raising capital for state-owned banks by state budget source is facing many difficulties and perhaps needs to wait for a while longer.
