Stubborn economic woes hit on banks’ capital commitments.

17:00 | 06/11/2012
In their statements to the general annual shareholders meetings for 2012, most Vietnamese banks mulled hiking chartered capital to add financial heft and sharpen competitiveness.

Their proposed moves are consistent with the State Bank’s on-going efforts to restructure the banking system and complement a trend toward mergers and acquisitions in the banking field.

NamA Bank intended to hike its chartered capital to VND3.7 trillion ($176 million) this year from VND3 trillion ($142.8 million) whereas ABBank envisaged scaling up its chartered capital to VND5 trillion ($238 million) from VND4.2 trillion ($200 million).

VietA Bank also planned hiking charted capital to VND5 trillion this year, surging 61 per cent against 2011.  For its part, Orient Commercial Bank (OCB) drew plan to hike chartered capital to VND4 trillion ($190 million) by the year-end against current VND3.4 trillion ($162 million).

OCB management said the move was crucial to enhance financial health and make the bank up to par with central bank’s sector restructuring targets, and could also pave the way for further network expansion and infrastructure development.

At this time, however, most of capital hike plans of small and medium-sized banks still sit on the drawing board amid tough business conditions.

NamA had yet to execute its capital hike plan, which was delayed from 2011.  

According to OCB top executives, the bank would take the move in an appropriate time but could not be certain whether the plan could be achieved in 2012 or not.

In 2011, OCB fulfilled 88.7 per cent of capital hike commitment to raise its chartered capital to current VND3.4 trillion. This shortfall came as the bank had difficulties in mobilising capital from existing shareholders.

Unlike some rival banks, DongA Bank finalised its commitment to hike chartered capital by an additional VND500 billion ($23.8 million) from VND4.5 trillion to VND5 trillion ($238 million).

Its next step is to further hike capital by VND1 trillion more to VND6 trillion before the year end through issuing additional shares to existing shareholders.

Asked about the plan, DongA Bank general director Tran Phuong Binh was quoted as saying: ‘The capital hike step will be taken when market conditions turn suitable.’

Banks assumed they had to delay capital hike plans due to the falling stock market, which made bank stock values too low at present.

Moreover, banks could not pin their hope on domestic and foreign strategic partners support when issuing new shares to hike chartered capital. For instance, at some banks like OCB and ABBank, their foreign strategic partners (BNP Paribas and MayBank, respectively) are holding 20 per cent stake of these banks,  reaching the limit as per current regulations.  

Local strategic partners of some banks are big financial groups, which are being forced to scale down non-core businesses so that banks will be unlikely to get support from these partners in their plans to boost finance.`

By Thuy Vinh

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