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Banks need VND11tril in 4 months
Banks have been moving heaven and earth to find VND11tril to increase their chartered capital to VND1tril each prior to January 1, 2009 as required by the State Bank of Vietnam.
Since the beginning of the year, some joint-stock banks have been trying to increase chartered capital by paying dividends to existing shareholders with stocks, selling additional shares to foreign strategic shareholders. It is estimated that some VND7tril has been injected in bank shares so far this year to serve the banks’ plans to increase chartered capital.
Analysts have estimated that banks will lure VND11tril from existing shareholders and investors. The banks which have the capital of less than VND1tril will need VND4,835bil to increase their chartered capital to VND1tril, while other banks, including ACB, Eximbank and SCB, are also looking to increase their chartered capital.
Ten banks must increase capital to VND1tril by January 1, 2009, namely Dai A, Kien Long, PG Bank, Vietnam Thuong Tin, Dai Tin, My Xuyen, and the four HCM City-based banks Bac A, Gia Dinh, Thai Binh Duong and De Nhat.
Many banks are anxiously waiting for their plans to increase capital to be approved by the State Bank of Vietnam and State Securities Commission. Bac A has got approval on its plan to increase capital from VND940bil to VND1,016bil. Kien Long Bank is planning to sell 42mil shares, including 40mil shares to existing shareholders and 2mil to its staffs at VND10,000/share. De Nhat has also submitted a plan on increasing capital to the State Bank of Vietnam.
Ho Huu Hanh, Director of the HCM City Branch of the State Bank of Vietnam, said that the central bank will decide the fate of banks which cannot increase chartered capital prior to January 1, 2009. Hanh said that the banks may face dissolution or bankruptcy.
Under Decree 141 from 2006 stipulating the legal capital levels for credit institutions, joint-stock banks must have the legal capital of VND1tril by the end of 2008, and VND3tril by 2010. Therefore, not only banks with less than VND1tril are racing to bring in money; banks which will need VND3tril are trying to stay ahead of the game.
However, unlike two years ago, it is not as easy now to issue more shares to increase capital. The government in June 2008 released an instruction to limit investments by state-owned companies in financial markets. This means that some state-owned corporations cannot purchase more stakes of joint stock-companies in which they have made capital contributions.
The HCM City Housing Development Bank (HDB), for example, has 57.8% of shares held by state-owned corporations, including the HCM City Urban Development and Investment (FIFU), Saigon Real Estate Corporation, the Bank for Investment and Development of Vietnam (BIDV), and Saigon Trade Corporation (SATRA). One of the big shareholders will not be able to increase its ownership ratio in HDB when the bank increases its chartered capital from VND1tril to VND1,500bil.
Moreover, analysts have warned that investors may be indifferent to the issuance of bank shares as they are now anticipating the IPO of the big bank Vietinbank. 20% of the bank’s stakes will be sold. The IPO of the bank was approved by the Prime Minister on September 23.
VNN
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