NCB seeks breakthrough through charter capital hikes

The 2019 general shareholders' meeting of NCB in late April

On February 12, 2019, National Citizen Bank (NCB) was approved by the State Securities Commission to sell stocks to existing shareholders and employees through private placements in a bid to raise its charter capital from VND3.01 trillion ($130.9 million) to more than VND5 trillion ($217.4 million).

Later, at NCB’s 2019 annual general shareholders’ meeting (AGM) in late April, the shareholders agreed to raise the bank’s charter capital even higher, to more than VND7 trillion ($304.3 million) this year and surpass VND10 trillion ($434.8 million) in the next development period to 2020, using various modes such as share issuance to domestic and foreign investors, to employees or through enacting convertible bonds.

Local banks are ramping up efforts to increase charter capital as there is less than a year left before the “deadline” set by the State Bank of Vietnam’s Circular 41, which required banks to meet Basel II capital adequacy requirements.

Besides the pressure from adherence to Circular 41, charter capital hikes will give banks more space for credit expansion, while in the meantime realising ambitious investment plans to expand infrastructure, technology systems, and operation networks.

In recent months, several banks have unveiled plans to enrich their capital sources. For instance, state giant Vietcombank, at its recent 2019 AGM, sought shareholders’ approval to raise its charter capital by more than VND14.8 trillion ($643.5 million) through private placements, dividend or bonus payment. Another state lender BIDV is offering to sell 603 million shares to foreign strategic partner KEB Hana Bank in a deal slated for completion this year.

Besides, smaller banks are also active, such as Nam A Bank which is planning to raise its charter capital to VND5 trillion ($217.4 million) or SeABank which is gunning for more than VND9 trillion ($391.3 million) within this year.

NCB sets to focus on charter capital hikes in 2019

Thus, NCB’s charter capital increase lies in the common development trajectory of local commercial lenders to meet the increasingly strict management requirements of the central bank (SBV) to apply international standards and optimise the financial market’s operations.

NCB’s capital hike plan is widely seen as fairly challenging as it targets foreign partners to boost shareholder capacity, striving to become a bank of medium capital scale.

Towards this end, NCB has been recently concentrating resources into upgrading infrastructure, modernising its IT system, and promoting digital banking, besides enlarging its network and enhancing its risk management and governance capacity.

Upbeat forecasts about the macroeconomy and the development of the banking sector, and effective enforcement of government and SBV policies on tackling bad debts and economic management has helped banks to do a smart job with restructuring, turning banks like NCB into lucrative targets for domestic and foreign investors.

This brings both opportunities and challenges for NCB to transform and forge ahead by following well-crafted business and management strategies.