Banks announce plans to significantly increase capital

VIETNAM, May 4 - HÀ NỘI — Many banks have recently announced plans to significantly increase charter capital to improve the capital adequacy ratio (CAR) and strengthen financial potential for credit and business expansion.

Techcombank has presented to shareholders a plan to increase capital from nearly VNĐ35.23 trillion to more than VNĐ70.45 trillion through issuing shares from equity sources. Under the plan, the bank’s shareholders who own 100 shares will receive 100 new shares.

At the annual general meeting (AGM) of Military Bank (MB), a proposal to increase charter capital by some VNĐ8.58 trillion in 2024 was approved. Besides the capital increase of nearly VNĐ7.96 trillion through stock dividends, MB will continue its plan to make private placement of an additional 62 million shares, equivalent to a charter capital increase of VNĐ620 billion. Implementation time for the plan is from 2024 to the second quarter of 2025.

Shareholders of LPBank has also approved a plan to offer up to 800 million additional shares to existing shareholders to increase charter capital from nearly VNĐ25.58 trillion to nearly VNĐ33.58 trillion at the minimum offering price of VNĐ10,000 per share.

The same plans have also been seen at SeABank, OCB, ACB, VIB and Nam Á Bank, of which SeABank will increase its charter capital by more than VNĐ5 trillion to VNĐ30 trillion; OCB by nearly VNĐ4.17 trillion to nearly VNĐ24.72 trillion; ACB by VNĐ5.8 trillion to more than VNĐ44.66 trillion; VIB by more than VNĐ4.4 trillion to VNĐ29.79 trillion; and Nam Á Bank by nearly VNĐ3.15 trillion to more than VNĐ13.72 trillion.

Latest statistics of the State Bank of Vietnam show as of January 2024, the total charter capital of the entire banking system was more than VNĐ1 quadrillion, an increase of 0.7 per cent compared to the end of 2023. Of the total, the group of State-owned banks had a total charter capital of VNĐ217.88 trillion, equivalent to the end of 2023; the group of joint stock commercial banks had a total charter capital of VNĐ543.19 trillion, an increase of 0.12 per cent; and the group of joint venture and foreign banks had a total charter capital of nearly VNĐ163.17 trillion, unchanged compared to the end of 2023.

The capital adequacy ratio (CAR) of credit institutions and foreign bank branches according to Circular 41/2016/TT-NHNN as of January 2024 reached 11.84 per cent, of which the groups of State-owned commercial banks and joint stock commercial banks reached 9.72 per cent and 11.89 per cent, respectively.

According to experts, the need to raise charter capital stems from requirements of improving the CAR, increasing the risk provision ratio, rising medium and long-term capital sources, and promoting investment in technology.

Banking expert Nguyễn Trí Hiếu said though the CAR of Vietnamese banks has improved, it still has not reached international standards and the average level of the banking industry in the region. The CAR of Vietnamese banks is still at low level compared to that of Indonesia (22.6 per cent), Philippines (17.2 per cent), Singapore (17.1 per cent), Thailand (19.6 per cent) and Malaysia (18.5 per cent).

Hiếu said, many banks in Việt Nam have not fully implemented the pillars of international banking standard Basel II, while some countries in the region have applied Basel III or part of it so charter capital increase is considered necessary to improve financial capacity and ensure the stability of the Vietnamese banking system.

It is forecast that 2024 will continue to be a challenging year for the banking industry as bad debt risks tend to increase. Therefore, charter capital will play an important role as a buffer to provide necessary resources for banks to cope with challenges and fluctuations in an unstable economic environment. — VNS