Banks, including Vietcombank, expect to use their high profits last year to increase capital in 2020. (Photo: VNA)Hanoi (VNS/VNA) - Banks, especially State-owned banks, are expected toincrease their capital significantly this year as they are allowed to retainprofits or pay dividend in shares instead of cash as previously.
Under a recent directive issued by the State Bank of Vietnam (SBV), banks willnot be permitted to pay dividends in cash to focus their resources on sharplyreducing interest rates for current loans and new loans, which is considered ameasure to help firms overcome difficulties caused by the COVID-19 pandemic.
According to experts, this means that banks, especially those with pre-taxprofit reaching up to dozens of trillions of Vietnamese dong last year, such asVietcombank, Techcombank and VPBank, will automatically have a source offunding to increase their charter capital if paying dividends in shares, orincrease equity if not paying dividends this year.
Besides using profits, banks also have to find other measures to increasecapital as the profits are not enough while they will have to meet the capitalrequirements under Basel II standards.
According to statistics at the end of 2019, the average capital adequacy ratio(CAR) of four state-owned banks including Vietinbank, Vietcombank, BIDV andAgribank according to Basel I standards was only 9.4 percent, slightly higherthan the prescribed minimum CAR of 9 percent. This level is much less than theCAR of private joint stock banks (12.1 percent) and lower than the average CARof the entire system of credit institutions (13 percent).
Nguyen Xuan Thanh, director of Development of Fulbright Vietnam, said ifcalculating based on Basel II standards, CAR of the banks would fall below 8 percent.
For BIDV, after successfully selling a 15 percent stake to KEB Hana Bank in2019 to collect more than 20 trillion VND (869.56 million USD) of new capital,the bank is planning to sell about another 6 percent of charter capital but thesuccess of this deal largely depends on the stock price developments.
Vietcombank last year also sold stakes to two foreign investors including GICand Mizuho for 6.2 trillion VND, raising its charter capital to 37.1 trillionVND. However, the rise was insignificant as Vietcombank’s charter capital isjust slightly higher than that of Techcombank (more than 35 trillion VND) andVPBank (more than 28 trillion VND) while the bank’s total asset size is fourtimes higher than Techcombank’s and VPBank’s.
In addition to the expected large number of dividends for raising capital,Vietcombank and VietinBank this year will receive capital from the State as theGovernment has so far agreed to set aside 10 trillion VND to increase capitalfor the two banks.
VPBank also expects to increase capital significantly this year. At the bank’sannual general shareholders meeting recently, VPBank said it was discussinginitial public offering (IPO) or a transfer of shares to the strategic partnerof FE Credit (wholly owned by VPBank). According to the bank’s representatives,it is awaiting approval and expects the plan to be implemented this year.
Similarly, SHB has so far also announced the plan to divest in its financecompany (SHBFC) to a major foreign partner. According to SHB, after divestingin SHBFC, SHB will have a large fund to increase charter capital.
NamABank was also approved by the SBV to increase its charter capital from morethan 3.890 trillion VND to 5 trillion VND through issuing 43.9 million sharesto its existing shareholders and 16.76 million shares under the Employee StockOwnership Plan (ESOP) besides carrying out a private placement of 50.3 millionshares./.
VNA
