While some small commercial banks failed to raise their charter capital last year, some major lenders have already approved adding millions of US dollars to their charter capital this year.

This is viewed as a positive sign amidst the current economic turmoil, but it is also a warning of increases in dividend payment sums.

Sacombank plans to hike its charter capital by 1 trillion VND (47.4 million USD) to 14.382 trillion VND (681.6 million USD) by the end of 2014. The SCB is targeting the addition of 2 trillion VND to make up its charter capital of 14.295 trillion VND (677.49 million USD).

VP Bank has obtained approval from the State Bank of Vietnam to scale up its charter capital to 6.347 trillion VND (300 million USD) from 5.77 trillion VND (273.46 million USD).

Oceanbank will raise its charter capital to 5.3 trillion 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's deputy general director Can Van Luc told Viet Nam Economic Times newspaper that opportunities for success still arose on the stock market because the capitalisation of bank shares constituted a large part of the market's activity.

Industry experts assume that the ongoing attempts to reform the banking system are gradually improving business at credit institutions and restoring public confidence by making it easier to request capital.

However, the head of an Ho Chi Minh City-based bank, which failed to raise its capital last year, pointed out that making the accompanying dividend payment would prove to be more challenging later on.

In a bid to bolster the ailing banking system and liberalise the industry, Vietnam in February lifted the level of strategic foreign ownership from 15 percent to 20 percent, while maintaining total foreign ownership at 30 percent for local banks.

In fact, amidst growing distress and the pressure of restructurings, banks performing poorly are in critical need of extra capital, which is difficult to gain from local sources.

Small banks step up

Small and medium scale banks have showed determination to raise their charter capitals within this year after failing to achieve the goal last year.

The charter capital increase was considered essential for small and medium-sized banks to enhance their financial capacity and competitiveness amid soaring competition and the hastened restructuring progress of the entire banking system.

The minimum legal capital of a credit institution was regulated at 3 trillion VND (142.8 million USD), and several banks in the country now had charter capitals at the minimum level or just slightly higher.

Nam A Bank planned to increase its charter capital from its current value of 3 trillion VND (142.8 million USD) to 4 trillion VND (190 million USD), with the objective of expanding its network along with the development of the entire banking system.

Accordingly, 100 million shares will be sold to the public, which is scheduled to be implemented in the third quarter of this year, at the price of 10,000 VND (0.47 USD) per share.

Viet A Bank, which currently has a charter capital of 3 trillion VND (142.8 million USD), is allegedly seeking a nod from the regulators to increase its capital by 500 billion VND (23.8 million USD).

Last month, Bac A Bank increased its charter capital from 3 trillion VND (142.8 million USD) to 3.7 trillion VND (176.2 million USD).

According to Nguyen Van Dung, the deputy director of the central bank's HCM City branch, the capital increases of small and medium-sized banks were necessary to improve their financial capacity.

However, the process needs to be put under careful consideration, given the decline witnessed in the prices of banking stocks last year, he was quoted by Dau Tu Chung Khoan newspaper.

In addition, the efficient use of the increased capitals was also a cause of concern along with rising pressure from the stakeholders about dividends, he pointed out.

While several banks planned to use their increased capital for network expansion, the central bank last year raised the standards for network expansion.

As per the regulations, banks keen on expanding their network must meet the requirements of the bad debt ratio at below 3 percent and set the required capital for setting up a branch in Hanoi and 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 bank was allowed to open a maximum of 10 branches in the inner cities of Hanoi and HCM City.-VNA