Commercial banks ready to hit bourse

The government is considering a proposal that would enable joint-stock commercial banks to list on the bourse in order to raise capital

A State Bank official told Vietnam Investment Review the draft, on the State Bank governor’s table for consideration before being submitted to the government, was due to be officially released as early as April.
The first three preconditions for banks to list are a bad debt ratio of less than 3 per cent of total outstanding loans, at least five years of operation and a profit returned in the last two consecutive years.
In addition, JSCBs that wish to list must have chartered capital not less than the cap on legal capital required for a joint-stock bank and must not have been involved in any violations in the banking and monetary sector in the previous year with financial sanctions of VND1 million or more.
The draft also forbids acting members of directoral boards and foreign and domestic shareholders who hold more than 10 per cent of chartered capital or preferable shares to participate in the stock market for JSCBs.
According to the head of the State Bank department for banks and non-bank credit institutions, Kieu Huu Dung, it is government policy to encourage as many banks as possible to join the bourse because this will be the most effective channel for banks to raise funds. Therefore, the listing conditions are not too difficult for most joint-stock banks to meet.
Take the bad debt ratio, for example. To ease the rules, the State Bank has agreed to let the ratio be calculated as per Vietnamese accounting standards, not strict international standards. The central bank predicts that by following Vietnamese accounting, up to two thirds of the 37 domestic JSCBs will be eligible to join the stock market because they have a ratio of less than 3 per cent.
As far as chartered capital and retained earnings are concerned, figures from the State Bank show that almost all JSCBs have chartered capital of VND200-500 billion ($?), much higher than the required legal capital of VND70 billion. A majority of banks gain profit annually, allowing many banks to pay 10 per cent dividends to shareholders, much higher than the interest rates of treasury or government bonds.
Among the leading JSCBs in the country, the Saigon-ThuongTin joint-stock commercial bank (Sacombank) ranks first with chartered capital of VND505 billion ($32.6 million). Then comes the Asia Commercial Bank (ACB) and the Eastern Asia Bank (EAB) with VND481 billion and VND250 billion respectively.
Since early this year when the government gave a green light to the listing of JSCBs, these three banks expressed their willingness and determination to float on the bourse under any circumstances, while the rest remained wary of listing.
“Raising funds from depositors is proving more and more difficult and the total amount we can mobilise from this channel remains very limited,” said ACB general director Pham Van Thiet. “Experience from developed countries have shown that listing on the bourse is the most effective way to raise funds to develop our business.”
Sacombank chairman Dang Van Thanh said his bank had prepared for listing and was eager to join the bourse, adding that he expected almost no difficulties during the process.