Banks raise capital to enhance financial strength
Many commercial banks have planned to increase capital, aimed to enhance their financial status and prepare for meeting Basel II standards by 2020.
At the recent annual general meetings (AGM), VietBank approved a plan to raise its charter capital by an additional VND1 trillion ($44.4 million).Accordingly, this year VietBank will add more than VND1.007 trillion ($44.7 million) through selling stocks to the public and employees.
LienViet Post Bank is considering raising charter capital
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Kienlong Bank also approved a plan to raise charter capital to VND3.236 trillion ($143 million) from the current VND3 trillion ($133 million) through issuing additional stocks to existing shareholders at its recent AGM.
The entire capital from the stock issuance will be used to enrich the bank’s fixed assets, expanding its operation network and supplementing capital sources for investment activities.
Nguyen Ngoc Toan, chairman of Ho Chi Minh City-based Nam A Bank, said that the bank recently submitted the shareholders its plan to raise charter capital from VND3.021 trillion ($134 million) to VND5 trillion ($222 million) through stock issuance to existing shareholders, its employees, and the public.
Nam A Bank aims to raise VND906 billion ($40.2 million) from existing shareholders, more than VND45 billion ($2 million) from employees, and about VND695 billion ($30.8 million) from the public through stock issuance. Besides, the bank will issue stocks to pay dividend to shareholders at a ratio of 11 per cent, with the total raised sum of VND332 billion ($14.7 million).
Meanwhile, some banks have sought to merge with others to increase capital as the application of Basel II standards is quite near.
At the recent AGM, all of PGBank’s shareholders agreed on a plan to merge PGBank and HDBank, while 94.3 percent of shareholders agreed to do so for HDBank. The merger of two banks will start soon, with share conversion in July and the merger wrapped up in August.
At this year’s AGM, LienViet Post Bank also said that it was considering raising charter capital, restructuring shareholders, completing an M&A, and restructuring credit institutions as requested by the State Bank of Vietnam.
VietinBank, one of the biggest domestic banks, after canceling its plan on admitting PG Bank, has said that a M&A plan with another bank is quite possible if it is a good opportunity for the bank to further grow.
Asked about the failure to admit PG Bank, VietinBank’s CEO Le Duc Tho said the negotiation process lasted too long, while the market performance changed rapidly and the two sides could not reach an agreement.
VPBank has also said it wants to raise charter capital to prepare for M&A deals and other business plans.
Besides, large banks are also considering seeking foreign capital to complete capital increase plans. BIDV, for example, is preparing to sell 15 percent of shares to KEB Hana from the Republic of Korea.
Vietnam’s draft plan on economic restructuring in 2016-2020, which was compiled by the Ministry of Planning and Investment and is soliciting public comments, has set forth the target to accelerate the restructuring of the banking sector.
One of the set goals is that 70 per cent of local commercial banks must reach Basel II standards by 2020. As of now, of the 10 banks in the central bank (SBV)’s pilot scheme, only Ho Chi Minh City-based Orient Commercial Bank (OCB) has announced having reached Basel II standards in capital and risk management.
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