Small banks working to bolster capital sources

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In its 2017 general shareholders’ meeting (GSM) last week, Ho Chi Minh City-based Orient Commercial Bank (OCB) approved this year’s action plan and once again sought shareholders’ approval to raise its chartered capital from the current VND4 trillion ($181 million) to VND5 trillion ($227 million).

The bank did not manage to realise its capital hike plan last year.

Also, OCB envisages forming or buying out a financial firm. In the first scenario, the new financial company must have at least VND500 billion ($22.7 million) in chartered capital as per current regulations.

In addition, the bank is set to establish a company operating in asset trading and debt management, capitalised at VND100 billion ($4.5 million).

To reach the new capital level, OCB contemplates issuing bonus shares to existing shareholders, sourcing capital from undistributed profits of more than VND194 billion ($8.8 million).

Another share volume valued at over VND805 billion ($36.5 million) will be distributed to selective buyers under a private placement format. The capital hike will later be set at a suitable time.

According to OCB chairman Trinh Van Tuan, the bank will be listed later this year or early next year when the market conditions turn favourable to increase stock liquidity.

Similarly, a string of other small and medium banks like VietA Bank, Nam A Bank or BacA Bank have plans to bolster capital sources this year.

Particularly, in its upcoming 2017 GSM next week, privately-held VietA Bank is set to get shareholders’ approval to raise its chartered capital from around VND3.5 trillion ($159 million) to more than VND4.2 trillion ($190 million), a plan which could not be realised last year.

Accordingly, the bank will issue stocks for dividend payment at the rate of 10 per cent to raise its chartered capital to over VND3.84 trillion.

Additional stock volumes will also be issued on the occasion under private placement to bolster its chartered capital to VND4.2 trillion.

The stocks will be offered at the face value of VND10,000 apiece, with one-year transfer restrictions. The move will take place in the second half of this year.

Meanwhile, BacA Bank plans to add VND500 billion ($22.7 million) to its current chartered capital of VND5 trillion (227 million) through distributing 50 million more shares.

Of this, nearly 40 million shares will be distributed to existing shareholders as for 2016 dividend payment, and 3.8 million shares to be offered under private placement.

The stock issuance is slated for the third quarter this year.

For its part, in its upcoming GSM on April 28, Nam A Bank plans to seek shareholders’ approval to raise its chartered capital to VND5 trillion ($227 million) within the year.

Earlier, in 2015, the bank was approved by the State Bank of Vietnam to raise its chartered capital from VND3 trillion ($136 million) to VND4 trillion ($181 million), but it could only raise its capital sources to VND3.17 trillion ($144 million) as a result of 2015 dividend payments.

Nguyen Van Thuan, head of the Finance-Banking Faculty at Ho Chi Minh City Open University, said that increasing competition pressure, coupled with the new standards of the Basel II Accord have forced banks, particularly small and medium-sized ones, to improve their financial capacity to avoid falling into the merger and acquisition wave.