Local lenders increase fund reserves

Agribank last week signalled its plan to file for an initial public offering (IPO)

State-owned lender Agribank last week signalled its plan to file for an initial public offering (IPO) in a bid to raise funds. The largest bank in terms of total assets has proposed a very promising IPO plan after years of delay.

The proposed schedule includes a two-stage equitisation, in which Agribank will first sell 0.5 per cent of its stakes to employees, then list on the stock exchange. In the second phase, after investors have found time to appraise and receive a more thorough overview, the official IPO will be conducted with a higher level of transparency.

“This is only a proposal at the moment, although we strongly support this bold movement. If approved, the proportion of the banking system in the VN-Index will skyrocket, and this could be a strong catalyst for the industry’s growth,” brokerage SSI Securities noted.

At the moment, COVID-19 is not denting the stock market’s ongoing rally, with local stocks climbing towards fresh records.

A handful of banks have also announced their ambition to increase their capital, thus enhancing their operation.

Ngo Quang Trung, general director of Viet Capital Bank, said the bank’s capital increase schedule has been planned and is in its preparation stage. Trung emphasised that capital increase is an imperative condition for the bank to improve its financial capacity and cement its position in the market.

In addition to raising capital, Viet Capital Bank also consulted shareholders to raise its foreign ownership limit (FOL) to 30 per cent, the maximum allowed cap. Representatives of Viet Capital Bank revealed that the bank is currently negotiating with foreign investors.

Previously, Nam A Bank also increased its charter capital to more than VND4.56 trillion ($198 million) by offering shares to existing shareholders, issuing new shares under the employee stock ownership plan, and private placement.

Nam A Bank, after filing an IPO on the Unlisted Public Company Market (UPCoM) two months ago, has also now signalled its ambition to list on the Ho Chi Minh City Stock Exchange (HSX). The bank also lifts its FOL to 30 per cent, seeking to tap into the red-hot international markets.

LienVietPostBank also completed its plan to expand its charter capital to VND10.7 trillion ($465.2 million) in 2020. The bank’s chairman, Huynh Ngoc Huy, said that enhancing capital will boost its network, improve competitive advantages in the retail segment, and modernise the IT system, thus developing the bank.

Meanwhile, Saigon Commercial Bank (SCB) recently announced its plan to raise capital to VND15 trillion ($625.2 million) in the period of 2020-2023. In addition, SCB’s board also approved a roadmap for listing on the HSX, no later than 2025.

On the other hand, the sale of banks’ subsidiaries could supplement their capital. For instance, rumour has it that VPBank has been negotiating with an important partner in the sale of shares of FE Credit, which is expected to be completed in the next 5-6 months.

In October, the government issued Decree No.121/2020/ND-CP amending Clause 2 under Article 12 of Decree No.91/2015/ND-CP from 2015 state capital investment in enterprises, and use and management of capital and assets in enterprises. Under the new decree, state-owned lenders are eligible to keep and use their profits to increase capital instead of paying cash dividends to shareholders.

Specifically, VietinBank might be one of the beneficiaries from the decree, as the bank has been stuck in the mud for years, struggling to increase its capital and satisfying the minimum capital adequacy ratio standards for Basel II.

Meanwhile, Dominic Scriven, chairman of Dragon Capital, noted that Vietnamese regulators should raise the FOL in the banking sector to a new threshold, such as 40-49 per cent, thus paving the way for international investors to access the Vietnamese market.