Banks seek further capital injections to boost strength

The State Bank of Vietnam has recently greenlit capital hike plans for a raft of banks, including Viet Capital Bank (BVB), Orient Commercial Bank (OCB), and Asia Commercial Bank (ACB), among others.

Along with this, BVB was allowed to add at most $70.3 million to its charter capital. After the move, the bank’s charter capital would reach nearly $230 million which would serve development requirements in the medium and long-term such as technology and material base improvement and network expansion.

Similarly, OCB was approved to raise its charter capital by an additional $2.56 million, of which $2.17 million would be raised through selling stocks to the labourers under the employee stock ownership plan and $383,400 to be sourced through private placement to Japan’s Aozora Bank.

After the move, OCB’s charter capital would swell to $598 million. At its AGM 2022, OCB also received the shareholders’ nod for distributing 413 million bonus stocks to existing shareholders at a 30 per cent ratio. The time of distribution is within this year.

After completing stock issuance, OCB’s charter capital would reach $777.6 million.

For ACB, after receiving the central bank’s approval for the capital hike plan, on June 6, the bank closed the shareholder list for stock dividend payments to its existing shareholders.

Particularly, ACB would distribute nearly 675.5 million stocks for dividend payments at a ratio of 25 per cent, meaning a shareholder owning 100 stocks will receive 25 new shares.

After finalising stock issuance, ACB’s charter capital would be injected at $293.6 million to reach $1.46 billion.

This year, the SBV continues guiding credit institutions not to pay cash dividends and save on costs to maximise business support.

Banks are keen on making stock dividend payments to raise charter capital in order to scale up capital safety and boost credit growth.

A string of banks, such as MSB, VIB, and SHB have embraced raising their capital sources by 25-35 per cent through stock dividend payments and bonus shares.

MSB has made a 2021 dividend payment to shareholders at a 30 per cent ratio to bolster its charter capital to more than $869 million this year.

VIB approved a plan to raise its charter capital to $913 million by making stock dividend payments and giving bonus shares to shareholders at a 35 per cent ratio. It also envisages distributing 0.7 per cent of equity capital to the employees.

Among state lenders, Vietcombank, VietinBank, and BIDV all have plans to replenish their capital sources.

Accordingly, BIDV would raise its charter capital by 21 per cent to reach $2.66 billion. Vietcombank wants to add $372 million to raise its charter capital to $2.43 billion, whereas VietinBank wants to add $247 million to boost its charter capital to $2.33 billion.

About their sizable capital hikes, banks assumed that the move is important to help them enhance financial stead to ensure capital adequacy ratio (CAR) as regulated by competent agencies.

SBV statistics show that by last September, the CAR of the group of commercial joint-stock banks averaged 11.38, and that of the state lender group averaged 9.17.

With the current CAR, a recent survey by Fitch Ratings shows that the capital scale of Vietnamese banks might expand by $10.7 billion more in the next three years to reach regulated operation safety standards.