Vietcombank and MHB equitisation approved

The two banks have received verbal approval; written will follow

“We are now sure Vietcombank and MHB have been shortlisted,” said Le Xuan Nghia, head of the State Bank strategy department.
“These two banks should hurry up and develop their equitisation plans.”
Nghia said the other three state-owned commercial banks, the Bank for Investment and Development of Vietnam (BIDV), the Bank for Agriculture and Rural Development (VBARD) and the Industrial and Commercial Bank (Incombank), would have to wait a little longer to be considered for equitisation.
“Vietcombank and MHB were chosen because they do better than the others in terms of profit, adequacy capital ratio and overdue debts,” Nghia said.
“This is the first time we have equitised state-owned banks so we have to ensure success – or at least smooth progress.”
Although no detailed guidelines have been worked out, the State Bank said that in principle it would allow the banks to sell a limited number of shares to individuals outside the bank, organisations and foreigners, to maximise fundraising.
“The state budget is becoming insufficient for the increasing capital demands of the five state-owned commercial banks (SOCBs), especially big ones like Vietcombank.
“Equitisation is the only way to help SOCBs increase their registered capital, raise funds from foreign investors and improve management capacity,” Nghia said.
It is expected that equitisation will help Vietcombank increase its chartered capital from $192 million to $580 million by 2005 and a similar amount for MHB.
With the extra capital, the adequacy capital ratios of Vietcombank and MHB, currently at around 4 per cent, will rise to the international standard of 8 per cent.
Vietcombank general director Vu Viet Ngoan told VIR his bank would try to start drafting the equitisation plan this year.
“It will probably take us two years to complete the equitisation and we can list on the bourse by 2006,” Ngoan said.
Ngoan said Vietcombank Securities Company (VCBS), the Vietcombank-owned, one-member limited company, would be equitised first.
An MHB official said the bank was planning to call for investment from big financial institutes such as the International Financial Company (IFC), and like Vietcombank it would also float its assets on the stock market within two years.
To ensure a good performance after equitisation, according to Ngoan, the crucial point is to build an effective management system, a solid financial background and develop the skills of employees.
It is for this reason that Vietcombank would continue the banking restructuring programme it started two years ago in parallel with the equitisation programme.