Small banks look to make bigger waves

But, whether their plans are feasible in the current context of market vulnerabilities remains an open question. 

The plan to hike its chartered capital from current VND3 trillion ($143 million) to VND3.7 trillion ($176 million) was once again submitted at NamA Bank’s recent general shareholder meeting after failing to turn into reality in the previous two years.

The bank’s management argued the move was important to scale-up NamA Bank’s financial competitiveness.

NamA Bank shares, traded on the over the counter market, have often fallen below the face value VND10,000 per unit.

One shareholder suggested completing the plan through resorting to support from strategic foreign partners.

Similarly, Southern Bank’s management sourced shareholders’ approval to hike capital from VND4 trillion ($190 million) to VND4.5 trillion ($214 million) this year at the bank’s general shareholder meeting in April through share issuances.

In fact, it took a long time for the bank to wrap up its capital hike to VND4 trillion.

Lately, VietA Bank’s general shareholder meeting passed a plan to hike its capital from minimum level VND3 trillion ($143 million) to VND3.5 trillion ($166 million) in 2013 to scale up strength. The bank’s capital supplemental plan, however, had delayed for two years.

This year, some banking sector big players also mulled enriching capital sources. For instance, Sacombank envisions hiking an additional 53 per cent, with 20 per cent sold to foreign partners, or Eximbank by 10 per cent.

So, how banks will use their additional capital?

Of the VND500 billion ($24 million) stated above, Southern Bank will use VND390 billion ($18.5 million) for lending and the remainder for purchases of fixed assets and equipment, according to a bank source.

In the face of banking sector’s poor credit growth so far the year, it would be hard for the bank to ensure efficient capital usage.

Besides, this year Southern Bank was allocated a 5 per cent credit growth target only against 15 per cent last year.

VietA Bank is mulling using additional capital amount to expand market share and operational areas through network expansion.

Accordingly, the bank is contemplating opening five new transaction offices, adding the capital source for fixed asset purchases and feeding the bank’s business shake-up plan.

National Financial Monetary Policy Advisory Council member Tran Hoang Ngan assumed banks’ hiking capital sources would be quite challenging in current context as there are still no signs for stock market’s marked improvement while small banks’ mergers and acquisitions are forecast to surge in the months ahead.