Banks hike charter capital to improve financial strength

18:52 | 10/07/2018
Many banks are set to hike charter capital to boost their financial strength through stock issuances to pay dividend for the shareholders.
banks hike charter capital to improve financial strength

OCB will raise its charter capital twice to bolster financial strength in the months to come

In previous years it proved difficult for banks to materialise charter capital hike plans due to unfavourable market conditions which brought down stock prices.

Besides, they could hardly seek the central bank (SBV)’s approval to raise charter capital through issuing more stock to pay dividends to shareholders or offer them a bonus in the form of shares, as they must comply with loss provisioning requirements.

Many banks seek shareholders' approval to raise charter capital in 2018 to enhance financial strength, and more importantly, to meet the requirements set in the Basel II Accord.

Banks’ performance has improved considerably in the past year and so did their ticker price, which were supposedly some of the reasons for the central bank to recently green-light banks’ charter capital hike plans.

On June 28, SBV approved Ho Chi Minh City’s Orient Commercial Bank (OCB) to raise charter capital from VND5 trillion ($222 million) to more than VND6.69 trillion ($297 million) through stock issuances.

Particularly, OCB will issue stocks to pay dividend for the shareholders at a ratio of 14.2 per cent and offer bonus shares to the shareholders at a ratio of 20.5 per cent.

In addition, the central bank approved OCB’s plan to raise its charter capital by an additional VND800 billion ($35.5 million) through private placements to selected domestic and foreign investors.

OCB is set to list its 750 million shares on the Ho Chi Minh City Stock Exchange (HoSE) in the late third quarter or the early fourth quarter this year.

In a recent talk with the media, the bank chairman Trinh Van Tuan said OCB’s market cap is expected to touch $1 billion after listing and they are set to complete selling to foreign strategic partners before listing.

SBV also gave the nod to Techcombank’s charter capital hike plan from over VND11.6 trillion ($518 million) to more than VND34.9 trillion ($1.55 billion) in 2018.

Earlier, in late May, privately-held VPBank was approved to raise its charter capital from VND15.7 trillion ($697 million) to VND25.3 trillion ($1.12 billion) in light of the bank’s capital hike plan which got the thumbs-up at the bank’s recent 2018 annual general shareholders’ meeting.

Accordingly, Techcombank contemplates raising its charter capital to VND27.8 trillion ($1.23 billion) maximally.

Military Commercial Joint Stock Bank (MB) has just received the approval to boost its charter capital from VND18.1 trillion ($806 million) to VND21.6 trillion ($960 million).

By Thuy Vinh

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