Banks scaling up charter capital goals

Domestic and foreign lenders have been ramping up their charter capital to compete in the country. Photo: Le Toan

The Vietnamese banking system was supplemented with more than VND33 trillion ($1.43 billion) of charter capital in 2020. By the end of last year, 18 Vietnamese banks recorded charter capital of over VND10 trillion ($434.8 million).

Earlier this month, digitally-led local lender TPBank was approved by the State Bank of Vietnam to increase its charter capital to more than VND10.71 trillion ($466 million), and is now eligible to open four more branches and two transaction offices nationwide in 2021.

Meanwhile, HDBank, the banking arm of Sovico Group, was among the most active lenders in capital hikes in 2020, increasing its funds by more than VND6.2 trillion ($270 million) to VND16.1 trillion ($700 million).

The bank issued nearly 290 million shares for the first dividend and bonus out of a total of 627.8 million shares approved by its shareholders to increase its capital in 2020.

The bank also issued convertible bonds to a foreign strategic partner, further increasing its capital adequacy ratio, in accordance with Basel II regulations.

SHB also increased its charter capital by more than VND5.5 trillion ($239 million) in the past year thanks to the successful offering of 300 million shares to existing shareholders and the issuance of more than 250 million shares to pay dividends in the 2017-2018 period.

ACB participated in the resources expansion plan by increasing to VND21.61 trillion ($940 million) through issuing shares to pay dividend at a rate of 30 per cent.

A string of other lenders also sharply raised more funds in 2020, including MB, newly-listed OCB, and SeABank.

Chartered capital rankings have changed significantly over the past year. The top 10 largest banks by charter capital at the end of 2020 were BIDV, VietinBank, Vietcombank, Techcombank, Agribank, MB, VPBank, ACB, Sacombank, and SHB. Compared to the end of 2019, SHB has outweighed SCB, while ACB surpassed Sacombank to the seventh place, and MB surpassed VPBank to sixth.

Meanwhile, the five largest banks by charter capital remain BIDV, VietinBank, Vietcombank, Techcombank, and Agribank, and have not changed their financial sources in the past year.

Currently, BIDV has the highest charter capital with more than VND40 trillion ($1.74 billion), followed by VietinBank, Vietcombank, Techcombank, and Agribank.

However, the competition is expected to be more intense in 2021, as a number of banks have specific plans to increase their charter capital.

In the fourth quarter of last year, VietinBank’s board approved to pay cash dividends for 2019 earnings and pay stock dividends for 2017 and 2018 performance at the rate of 28.8 per cent, raising capital charter capital to VND48 trillion ($650 million).

Afterwards, the bank will officially comply with the capital adequacy ratio (CAR) according to Basel II. The application of the standard would help VietinBank increase transparency. Investors, partners, and depositors can then check their own transactions and VietinBank would also have more appropriate risk management policies, thus building more favourable relationships with foreign organisations.

Nguyen Anh Tung, banking analyst at KB Securities, noted that in the long term, VietinBank expects to issue shares to domestic strategic investors and a foreign strategic one to raise charter capital by 2025, thereby lowering the state ownership to 51 per cent.

“This is the best option for VietinBank to improve its CAR, raise the credit growth limit, and limit the loss of market share to commercial banks,” Tung highlighted.

Elsewhere, the National Assembly has recently agreed to add up to VND3.5 trillion ($152.2 million) to increase Agribank’s charter capital.

Other foreign financial institutions are also joining the capital hike bandwagon to ramp up their presence in Vietnam.

South Korean consumer finance firm Lotte Finance has raised its charter capital from VND991 billion ($43.1 million) to nearly VND1.31 trillion ($57.1 million). It is wholly-owned by LOTTE Card Co., Ltd.

In 2017, Lotte Card fully acquired Techcom Finance, a subsidiary of Techcombank, to become the very first South Korean credit card company to enter the Vietnamese consumer finance market. This move also illustrated Lotte Group’s ambition to gain an upper hand in the battle of the Southeast Asian country’s vast potential.

Sun Life Vietnam has also just been approved by the Ministry of Finance to increase its charter capital from VND5.07 trillion ($220.4 million) to VND14.38 trillion ($625 million). According to general director Larry Madge, this fresh source would help Sun Life Vietnam strengthen its financial capacity, as well as continue to pursue its goal of helping its customers achieve lifetime financial security and enjoy healthier lives.