After a run against time seeking for shareholders to increase charter capital of VND 3,000 bln per bank under Regulation No. 141/CP of the State Bank, small banks especially ones with charter capital lower than VND 1,000 bln have partially resolved the puzzle in following the proposed roadmap. However, the question of how banks have carried out their plans remains unanswered while merger and acquisition have not yet happened.
Banks are seeking out ways to gain VND-3,000-bln charter capital demand.
Small banks, great pressure
Functional agencies note that of 39 commercial banks, 9 banks have charter over VND 3,000 bln and another 9 banks have from VND 2,000bln to VND 3,000bln, and the remaining ones lie below VND 2,000 bln baseline. This means that small banks are accounted for great portion of commercial banking system; and thus, results of the so-call VND-3,000-bln race are still ahead.
One banking official anonymously said that banks have chosen stock posting as a way of capital mobilization; however, in the face of rushing calls for investment in the whole banking system, great pressure is made especially to small JSC banks. Meantime, greatger banks are on the same channel of stock market investment so as to achieve totally over VND 50,000 bln. As far as such rush is concerned, stock market in Vietnam remains sluggish in 2006-07 period with low price in the market and on OTC. On the other hand, 1,500 state-own enterprises have been privatized in 2010 leaving just 1/10 of remaining enterprises, which are accounted for a great capital source of about 70% of State’s capital in enterprises, to be privatized. Therefore, it becomes tough for banks in the whole ‘story’ of capital increments.
Strategies are satisfying in some banks
Surveys of enterprises showed that pressure is released in some banks that proposed strategies of granting stocks to current shareholders, staffs, and domestic and international partners.
“Capital increment roadmap of SHB approved by its Board of Shareholders is submitted in documents to State’s Securities Committee by Board of Management. By its plan in 2010, SHB has concluded its target from VND 2,000 bln to VND 3,500 bln by August 20th through 2 stages of transferring bonds and granting stocks. The bank targeted to reach VND 5,000 bln by April 2011. SHB is on progress without any obstacle,” said Mr. Dang Trung Dung – Deputy General Director of SHB.
General Director of Dai A Bank Quach Cong Phong confirmed that charter capital increase plan of the bank is approved by the State Bank and its Board of Shareholders to increase from VND 1,000 bln to VND 3,100 bln.
Merger and acquisition not yet to happen
Small banks of lower than VND 1,000 bln are relatively relieved of pressure emerged; however, it is questioning for those small banks to mobilize enough VND 3,000 bln to meet the schedule. Information revealed by one bank director put it that it is hard on banks to implement its plans of capital increase because the mobilization is at the same time in banks some of which could only earn 1/3 of target. Meanwhile, highly increasing bad debts (5% higher than acceptable rate) created difficulties in network expanding and reduced attractiveness to investors. However, “great shareholders indentified banking investment as long-term and will gain “all sources” to satisfy demand of VND 3,000 bln thanks to safety of investment in the field” as revealed.
State’s Bank confirmed that a lot of submitted proposals have put the target of over VND 3,000 bln. One official of State’s Bank Binh Duong Branch revealed that merger and acquisition are not mentioned by banks despite obstacles ahead.
Reported by Truc Huynh – Translated by Vi Bao
