Agribank is facing many challenges, especially in increasing its charter capital and conducting equitisation, yet it remains ambitious for 2021.
Speaking at the conference on implementing Agribank's tasks for 2021, Nguyen Thi Hong, Governor of the State Bank of Vietnam (SBV) highly appreciated the bank's impressive performance in these unprecedented times.
|The state-owned lender Agribank is set to accelerate charter capital increase and equitisation in 2021 |
In 2020, Agribank also pioneered supporting vulnerable businesses and individuals who were hit hard by the outbreak, with seven interest rates cut, and fees lowered nine times.
Last year saw the bank’s total assets increase by 8 per cent, credit increased by 8.1 per cent, and capital mobilisation increased by 11.3 per cent.
However, the governor pointed out that there are still many difficulties besetting Agribank, notably the slow pace of capital increase and equitisation.
According to Governor Hong, 2020 is the last year to restructure and settle sour debts by credit institutions in 2016-2020.
Agribank, on the other hand, has completed approximately 90 per cent of the plan associated with non-performing loans (NPL), including an NPL ratio in line with the state’s regulations, as well as ample pre-tax profit and outstanding loans in the agricultural and rural sectors. Specifically, the lender has exceeded its net non-credit revenue ratio target, as well as added revenue generated from other banking services, and better asset quality.
However, the bank still pales in comparison with its peers in terms of the growth rate of business operations, total assets, as well as capital adequacy ratio compared to Basel II standards.
The major roadblock lies in Agribank’s dependence on the state budget, since it is a state-owned lender. Experts believed that Agribank needs an injection of around VND3.5 trillion ($152.2 million) from the Vietnamese authorities for a capital hike.
In 2020, thanks to its concerted efforts amid the pandemic, the bank saw its profit target exceed the initial plan by 3 per cent. Thus, Agribank is eligible for a charter capital hike but so far, the procedures are still incomplete.
Currently, 70 per cent of the bank’s total outstanding loans are related to agricultural and rural demands.
Tiet Van Thanh, general director of Agribank, said that capital hike is still their Achilles heel. Over the past five years, Agribank has only raised its charter capital by VND348 billion ($15.13 million) each year while the target was to increase it by more than VND5 trillion ($217.4 million).
The SBV’s Governor has urged Agribank to coordinate with relevant ministries and parties to accelerate its equitisation process, especially issues related to real estate arrangement.