Vietnamese banks struggle to raise capital

In 2012 DongA Bank was approved by the State Bank of Vietnam (SBV) to raise its registered capital from VND5 trillion ($237 million) to VND6 trillion ($284 million) by selling new shares to existing shareholders at a par value of VND10,000/share (US cent 47.4).

But by the end of last year, when the permission order expired, the shareholders had not submitted or pledged enough money, so the bank voided the result of the issuance and returned the money to the share buyers. The bank also failed to find foreign strategic investors.

Much bigger Eximbank has also faced difficulties raising capital. In 2013 the bank planned to raise its registered capital from VND12.355 trillion ($585.5 million) to VND13.11 trillion ($621.37 million) using profits from that year’s business. But by the end of the year the bank’s profits only reached 28 per cent of the target ($39.24 million compared to the planned $142.2 million). Eximbank has since given up.

For a few years now VietABank has been trying to sell off 40.2 million shares to raise its registered capital from VND3.5 trillion ($165.87 million) to VND3.92 trillion ($184.92 million) by paying share dividends and issuing bonus shares, but has yet to succed.

The reason banks are struggling to sell shares is that in most cases the market price of their shares are too low, sometimes under the par value of VND10,000/share, as in the case of VPBank, Maritime Bank, and DongA Bank. The low price makes the shares unattractive to most investors.

The pressure to raise registered capital is particularly high on banks with registered capital of between VND3 trillion ($142.2 million) and VND4 trillion ($190 million), as the SBV plans to merge small-scale, weak banks to reduce the country’s total from the current 30 to around 14-17.