Banks ramp up capital to improve competitiveness

Friday, Jan 16, 2015 11:26

Many banks are trying to boost their charter capital to consolidate competitiveness. — Photo

HA NOI (Biz Hub) — Many banks are trying to boost their charter capital to consolidate their competitiveness, reported Dau tu (Vietnam Investment Review).

Nam A Bank General Director Tran Ngo Phuc Vu had said earlier this month that the State Bank of Viet Nam (SBV) has permitted his bank to ramp up its charter capital from VND3 trillion to VND4 trillion (from US$142.86 million to $190.48 million).

Vu added that the bank would have implemented the capital increase during the fourth quarter of last year, in accordance with a plan adopted at its 2014 shareholder meeting, but it had just received official permission for dealing with procedures and waiting for licences from relevant agencies "took time."

He further said the bank will issue shares to raise capital and that this process is expected to be completed in the first quarter of this year. It will also list shares on the stock market to enhance its financial capacity to catch up with market developments.

Sai Gon Commercial Bank's (SCB's) bid to raise equity by VND2 trillion ($95.24 million) to more than VND14.29 trillion ($680.48 million) is also underway, after the SBV approved the scheme late last year. The bank will increase capital by offering investors 200 million shares through put-through transactions.

SCB General Director Vo Tan Hoang Van said the bank is finalising a plan that will help it improve its financial capacity in context of its restructuring process.

Of the total amount to be added, the bank will use VND250 billion for investments and capital contribution and VND255 billion for information technology upgrades. It will also spend VND45 billion on office upgrades, and reserve VND1.45 trillion as additional business capital.

The Orient Commercial Bank has also issued about 31.3 million additional shares, with funds extracted from undistributed profits and equity supplement reserves, to begin a capital increase plan approved by the SBV late last year.

This bank will raise its charter capital from VND3.23 trillion to VND4 trillion (from $153.81 million to $190.48 million), as per a decision taken at its shareholder meeting in 2014.

However, many other banks are yet to implement their capital increase plans, due to obstacles resulting from stock declines and investors' shrinking interest in the face of an on-going banking restructuring process. These include the VietABank, SaigonBank, BaoViet Bank and DongA Bank, according to Dau tu.

In April 2014, the DongA Bank had to cancel a plan to raise capital from VND5 trillion to VND6 trillion (from $238.10 million to $285.71 million) as investors had failed to contribute as much money as they had committed before.

Business Development Institute Director Le Xuan Nghia said continuing banking reforms will narrow the spectrum of banks operating in the banking system, where only institutions that are healthy enough and have a solid financial capacity will be able to exist.

Banks raising capital are among measures that will help them ensure competitiveness in the coming months in this era of "fierce competition", he said, noting that it is not easy for small banks to do so, considering that market conditions remain tough.

Many banks will have to choose mergers and acquisitions to survive, he added. — VNS

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