While some small commercial banks failed to raise their charter capitallast year, some major lenders have already approved adding millions ofUS dollars to their charter capital this year.
This is viewed asa positive sign amidst the current economic turmoil, but it is also awarning of increases in dividend payment sums.
Sacombank plans tohike its charter capital by 1 trillion VND (47.4 million USD) to 14.382trillion VND (681.6 million USD) by the end of 2014. The SCB istargeting the addition of 2 trillion VND to make up its charter capitalof 14.295 trillion VND (677.49 million USD).
VP Bank has obtainedapproval from the State Bank of Vietnam to scale up its charter capitalto 6.347 trillion VND (300 million USD) from 5.77 trillion VND (273.46million USD).
Oceanbank will raise its charter capital to 5.3trillion VND (251.2 million USD) by the year-end from 4 trillion VND(189.57 million USD).
These plans will be implemented by issuing shares to existing shareholders and offering shares on the stock market.
BIDV'sdeputy general director Can Van Luc told Viet Nam Economic Timesnewspaper that opportunities for success still arose on the stock marketbecause the capitalisation of bank shares constituted a large part ofthe market's activity.
Industry experts assume that the ongoingattempts to reform the banking system are gradually improving businessat credit institutions and restoring public confidence by making iteasier to request capital.
However, the head of an Ho Chi MinhCity-based bank, which failed to raise its capital last year, pointedout that making the accompanying dividend payment would prove to be morechallenging later on.
In a bid to bolster the ailing bankingsystem and liberalise the industry, Vietnam in February lifted the levelof strategic foreign ownership from 15 percent to 20 percent, whilemaintaining total foreign ownership at 30 percent for local banks.
Infact, amidst growing distress and the pressure of restructurings, banksperforming poorly are in critical need of extra capital, which isdifficult to gain from local sources.
Small banks step up
Smalland medium scale banks have showed determination to raise their chartercapitals within this year after failing to achieve the goal last year.
Thecharter capital increase was considered essential for small andmedium-sized banks to enhance their financial capacity andcompetitiveness amid soaring competition and the hastened restructuringprogress of the entire banking system.
The minimum legal capitalof a credit institution was regulated at 3 trillion VND (142.8 millionUSD), and several banks in the country now had charter capitals at theminimum level or just slightly higher.
Nam A Bank planned toincrease its charter capital from its current value of 3 trillion VND(142.8 million USD) to 4 trillion VND (190 million USD), with theobjective of expanding its network along with the development of theentire banking system.
Accordingly, 100 million shares will besold to the public, which is scheduled to be implemented in the thirdquarter of this year, at the price of 10,000 VND (0.47 USD) per share.
VietA Bank, which currently has a charter capital of 3 trillion VND (142.8million USD), is allegedly seeking a nod from the regulators to increaseits capital by 500 billion VND (23.8 million USD).
Last month,Bac A Bank increased its charter capital from 3 trillion VND (142.8million USD) to 3.7 trillion VND (176.2 million USD).
Accordingto Nguyen Van Dung, the deputy director of the central bank's HCM Citybranch, the capital increases of small and medium-sized banks werenecessary to improve their financial capacity.
However, theprocess needs to be put under careful consideration, given the declinewitnessed in the prices of banking stocks last year, he was quoted byDau Tu Chung Khoan newspaper.
In addition, the efficient use ofthe increased capitals was also a cause of concern along with risingpressure from the stakeholders about dividends, he pointed out.
Whileseveral banks planned to use their increased capital for networkexpansion, the central bank last year raised the standards for networkexpansion.
As per the regulations, banks keen on expanding theirnetwork must meet the requirements of the bad debt ratio at below 3percent and set the required capital for setting up a branch in Hanoiand HCM City at 300 billion VND (14.2 million USD) and 50 billion VND(2.3 million USD) for a branch in other locations. In addition, a bankwas allowed to open a maximum of 10 branches in the inner cities ofHanoi and HCM City.-VNA