Government backs capital hike plans for four State-owned banks

Vietinbank could retain profits in 2018 and 2019 to serve the capital hike plan. - Photo vietnamfinance.vn

These four banks are Viet Nam Bank for Agriculture and Rural Development (Agribank), Viet Nam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Joint Stock Commercial Bank for Foreign Trade of Viet Nam (Vietcombank) and Bank for Investment and Development of Viet Nam (BIDV).

At a recent meeting reviewing last year’s performance of Vietinbank, Minh said four State-owned banks have contributed more than VND92 trillion (roughly US$4 billion) to the State budget in the past five years, of which VND60 trillion was tax and VND32 trillion was dividend payments.

But these banks have not raised charter capital during that period.

Minh said the Government has allowed the banks to increase capital as they need more funds to ensure growth and provide capital to the economy to help maintain the country’s high economic growth.

He said Vietinbank could retain profits in 2018 and 2019 to serve the capital hike plan, but profits of 2019 and 2020 need evaluation to be consistent with its business activities.

The Ministry of Finance is revising regulations to report to the Government about the capital hike plan for these banks. Minh said Vietinbank needed to report to the finance ministry about its capital plans based on its 2019-20 growth and business results.

The Governor also said current regulations allow banks with more than 50 per cent of State capital to issue bonds to increase tier 2 capital (supplementary capital) without permission from the central bank.

In 2019, Vietinbank reported profits of nearly VND11.5 trillion ($496 million), up 26 per cent over its yearly plan and up 83 per cent compared to 2018. By the end of the year, the bank had assets of VND1.24 quadrillion, up 6.5 per cent compared to the previous year, while outstanding loans reached VND952 trillion, up 7.2 per cent.

Total deposits increased 5 per cent to VND892 trillion. Its bad debt ratio was reduced to less than 1.2 per cent from 1.59 per cent in 2018.

Vietinbank targets a 10 per cent growth for pre-tax profit this year on the basis of not raising capital. Total assets, loans and deposits are expected to growth by 6-10 per cent.

However, in 2020, the Governor asked the bank to better control the growth of risky assets, quickly divest from non-performing investments in the past year and focus more on priority areas. In addition, the bank must reduce at least 30 per cent of the internal bad debt and bad debt at Vietnam Asset Management Company (VAMC).

Vietcombank and BIDV have yet to disclose business results of the whole year of 2019, while BIDV on Wednesday posted a record pre-tax profit of VND10.8 trillion last year.