As shareholders are unable to make divestment and also to pour more capital, Saigon Commercial Joint Stock Bank for Industry and Trade (Saigonbank) could not increase its charter capital and expand business operations.
After a disappointing second quarter (Q2), shareholders of Saigonbank are holding their breath and waiting for the Q3 business results to see if the bank is again unable to complete the profit target as in recent years or not.
Saigonbank’s business performance in the last few years only recorded a very low completion rate of the year plan. Typically, in 2017, the bank set a pre-tax profit target of 270 billion dong, but only attained 71 billion dong, completing 26 percent of the year plan. In 2018, Saigonbank aimed to achieve a pre-tax profit of 150 billion dong, but only made over 52.5 billion dong, completing just about 35 percent of the year plan.
In 2019, Saigonbank continued to set a pre-tax profit target of 175 billion dong. Although this profit number is fairly modest compared to other banks, it is still a big challenge when it is 233 percent higher than the realised number in 2018.
The difficulty is even greater when the Basel II implementation roadmap is approaching, and the SBV tends to continue tightening credit growth. Even the financial experts are not surprised by this overly high profit target of Saigonbank, especially when it only aims to increase total assets by only 10 percent in 2019 to 22.440 trillion dong, and total outstanding credit by only 10 percent to about 15.150 trillion dong.
As of June 30th 2019, Saigonbank’s total assets were more than 21.291,5 trillion dong. The bank’s lending to customers slightly increased compared to the beginning of the year, reaching more than 14 trillion dong. Meanwhile, the bank’s total bad debts increased by about six percent, recorded at over 318.7 billion dong. The ratio of bad debts on outstanding loans was slightly up from 2.2 percent in the beginning of the year to 2.25 percent.
If this situation is unchanged, it is most likely that Saigonbank will continue to miss the profit target this year.
The current situation of Saigonbank surprises many people as it is the first private joint stock bank established in the system of Vietnamese joint stock banks. However, over 32 years of operation, the bank is still in the last group in the system in terms of size as well as business performance. Saigonbank’s charter capital is now only 3.080 trillion dong, the lowest in the banking system.
Saigonbank itself also sees that small capital size is one of the biggest barriers limiting its operation, in addition to many other weaknesses such as customers easily confusing Saigonbank’s brand with many other names, weak competitiveness, heavy dependence on credit, etc.
However, according to experts, the biggest barriers for Saigonbank is currently shareholder structure In particular, the largest shareholder of the bank is HCM City Party Committee Office which holds more than 18 percent of the capital. In addition, Phu Nhuan Construction and Housing Trading Limited Company and Ky Hoa Tourist and Trading Company Limited which both hold more than 16 percent; followed by Saigon Petrol with more than 14 percent of ownership. These four units are holding more than 65 percent of Saigonbank’s stake. The remaining 35 percent of stake is in the hands of other individual shareholders.
Meanwhile, according to the provisions of the Law on Credit Institutions, an institutional shareholder may not own more than 15 percent of the charter capital of a credit institution. It means that many major shareholders of Saigonbank will have to divest from this bank, especially HCM City Party Committee Office. In fact, for a long time, this shareholder has wanted to divest all capital from Saigonbank, but so far it has not been possible.
Since major shareholders have neither been able to divest nor poured more capital, Saigonbank’s charter capital has remained the same since September 26th 2012 until now. It is not to mention that the divestment intention of HCM City Party Committee Office has also made Saigonbank’s senior personnel to constantly see changes and that has also significantly affected the bank’s business activities.
