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Banks trying to raise capital, investors worry
Commercial banks have started a new process of raising chartered capital after they successfully increased the capital to VND 1 trillion prior to December 31, 2008.
The Decree No. 141 2006 stipulates that the legal capital commercial banks must have by December 31, 2010 is VND 3 trillion, which means that small banks do not have much time and they need to start increasing capital beginning now.
Dai A, Viet Nam Tin Nghia, and Dai Duong, which had just raised the chartered capital to VND 1 trillion by the end of 2008, are now drawing up the plan to raise the capital to VND 2 trillion by the end of the year, before it raises the capital to VND 3 trillion by the end of the next year.
The General Director of a bank admitted that it is very difficult to raise capital at this moment, but it has to as it does not want to see the operation license revoked.
According to Dr. Le Tham Duong from the HCM City Banking University, there are two reasons for banks to try to increase capital; in order to meet the requirement on VND 3 trillion in legal capital by December 31, 2010 and in order to improve the financial capability.
The East Asia Bank’s shareholders’ meeting has approved the plan to raise the chartered capital from VND 2.9 trillion to VND 3.4 trillion, while Sacombank goes from VND 5.1 trillion to VND 6.7 trillion.
Doubts rose about feasibility
At the shareholders’ meeting of Sacombank held several days ago, a lot of shareholders of the bank expressed the doubts over the feasibility of the capital increase plan this year. They have every reason to worry, especially when Sacombank in 2008 had to cancel the plan on issuing shares to the public to raise capital top VND 6 trillion.
Even the Asia Commercial Bank, which is considered to have powerful financial capability, also keeps cautious with its capital increase plan. The bank has decided that it will raise capital if it exceeds the profit plan in the first half of the year, while it will delay the plan if it does not.
Several commercial banks already have the money needed to increase capital. ACB, for example, will use VND 1.3 trillion it got from the convertible bond issuance previously to increase chartered capital to VND 7.7 trillion by the end of 2009. Eximbank’s shareholders will not have to spend more money, as the bank plans to use VND 6 trillion in surplus it got previously from selling stakes at high prices. Saigon Bank plans to raise capital from VND 2 trillion to VND 3.4 trillion by issuing convertible bonds.
Meanwhile, the banks, which have to issue shares to increase capital, will have to face big challenges as the share prices have been decreasing.
There are not many lucky banks like the An Binh Bank, whose foreign partner Maybank is ready to pay money to purchase more shares. The global financial crisis has forced many big banks in the world to narrow their operations.
A HCM City-based joint stock bank has announced that it has stopped negotiations with a foreign partner on selling stakes.
A lot of banks think that they should issue more shares to existing shareholders. However, this proves to be the solution which does not have high feasibility. Local newspapers have reported that a bank announced the deadline of February 25 for registering to buy shares, but many of its shareholders missed the registration.
VietNamNet, TP
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