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Vietnam banks seeking capital rush to list shares
A large number of new bank shares are expected to go on sale this year as commercial banks try to raise capital for meeting higher requirements from the central bank.
Listing shares on the country’s stock market will be the main method to raise capital, bankers said.
“Small banks are rushing to list their shares, hoping they can boost capital through the stock market,” said Le Xuan Nghia, Vice Chairman of the National Financial Supervision Commission. “A new wave of capital raising and equitization has arrived.”
The State Bank of Vietnam requires commercial banks to raise their registered capital to at least VND3 trillion (US$162.5 million) by December this year, which is triple the current minimum level of VND1 trillion.
In an attempt to make sure all lenders meet the requirement, the central bank has ordered them to report on their plans to raise capital by the end of March. Commercial banks have also been asked to propose their own solutions in case they fail to raise enough capital by the deadline.
A government decree stipulates that if a financial institution is unable to meet the minimum capital requirement set for each period, it will face penalties or have its license revoked.
Economist Le Tham Duong of the Ho Chi Minh City Banking University said there are various methods to raise capital, including issuing shares, convertible bonds or mergers and acquisitions.
But a deputy director of a commercial bank, who wished to be unnamed, said M&A is not an option for local lenders as it’s really difficult to apply for a new license now. Listing shares, therefore, is the easiest way to raise capital.
‘Pressure’
Among Vietnam’s six listed banks, Hanoi-based Saigon-Hanoi Bank is the only lender with registered capital of less than VND3 trillion.
Some partly-private banks are seeking approval to list on the stock market, including Can Thobased Western Bank and HCMCbased Navibank.
Around 20 banks in Vietnam have registered capital of between VND1 trillion and VND2 trillion, which means they have to double or even triple their capital.
It may be a “mission impossible” for lenders, analysts said in a Vietnam Economic Times’ report last week. An expert was also quoted as saying it was hard to raise capital, but harder still to put the new capital to good use.
Economist Le Tham Duong told Thanh Nien when capital is increased two or threefold, lenders will be put under pressure to make sure their profits grow by the same extent so they can still pay high dividends to shareholders.
But with credit constricting even more than last year, it would be hard for commercial banks to expand their business and make good money in 2010, he added.
Vietnam plans to tighten bank lending and reduce credit growth this year to around 25 percent from 38 percent in 2009 as the government wants to prevent inflation.
Thanh Xuan
thanhnien
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