Weak bank shares slow capital flow
Most commercial banks have delayed plans to increase charter capital because of difficulties in the monetary and stock markets.
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Banking sector share prices have reduced sharply, making it difficult to attract investors.
Earlier this year, most banks had plans approved by shareholders to improve financial capacity and competitiveness and expected to complete them this year.
This was to avoid being caught up in a merger and acquisition (M&A) as the Government kicked off its banking restructuring process.
Smaller banks have become the target of bigger banks so less competitive banks need to increase their charter capital to protect themselves.
For example, Nam A Bank planned to list on the HCM City Stock Exchange and increase its charter capital, said management board chairman Nguyen Thi Xuan Loan. The bank would not accept a M&A. However the time was not right for a listing.
VietA Bank also planned to issue shares to increase its charter capital to VND5 trillion (US238 million), 61 per cent higher than last year. The bank is waiting for a better share price before trying to raise capital.
Another is Orient Joint Stock Commercial Bank (OCB) which planned to lift its charter capital to VND4 trillion ($190.4 million) by the end of this year from its current VND3.4 trillion ($162 million).
However, OCB management board chairman Nguyen Quang Tien said timing was of the essence in the stock release. He pointed out that last year the bank's plan to increase charter capital had not succeeded because shareholders lacked the funds.
Sharing those sentiments, DongA Bank general director Tran Phuong Binh said increasing his bank's charter capital to VND6 trillion ($285.7 million) would have to wait until a more suitable time.
Meanwhile, banks said they had not been able to rely on foreign sources as the percentage of foreign strategic partners at some banks was limited to 20 per cent.
Contributing to bank woes was the Government's requirement that private and State companies sell non-core investments, causing banks to lose shareholders.
At VietA Bank for example, Sai Gon Jewellery Company Limited's sale of VietA shares on the market would affect the bank's plan to increase charter capital, according to Dau Tu newspaper.
Member of the National Advisory Council on Monetary and Finance Policies Le Xuan Nghia believed banks should accept mergers. He warned it would not be easy for small and weak banks to increase capital.
"Merging into other more powerful banks may prove to be the best solution," he said.
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