ACB is among a few banks to complete the charter capital this year (Photo: ACB) Hanoi (VNS/VNA) - Banks are facing major challenges to carry out theircapital increase plans this year due to the impacts of the COVID-19 pandemic.
To meet the capital adequacy ratio (CAR) of the international banking standardBasel II as required by the State Bank of Vietnam (SBV), many State-owned andprivate commercial joint-stock banks approved plans to increase capital earlythis year.
However, the pandemic might ruin their plans, especially for banks thatdidn’t report high profit last year. It has been reported that only a fewbanks, including ACB and Bac A Bank, have succeeded in their capitalincrease plans to date.
Recently, ACB was among few banks to complete the charter capital hike from 16.63trillion VND (713.73 million USD) to nearly 21.62 trillion VND through issuingshares at a rate of 30 percent to pay dividends in 2019.
Bac A Bank also increased its charter capital from 6.5 trillion VND to 7.1trillion VND by issuing 58.5 million additional shares to pay dividends, with aratio of 9 percent.
Some other banks expect to do the same to increase their capital in theremaining months of this year as it is considered the most feasible method amidthe pandemic.
HDBank announced it would issue shares to pay dividends at a rate of 50 percentand bonus shares at the rate of 15 percent, increasing its charter capital fromnearly 9.81 trillion VND to 16.088 trillion VND.
If the issuance is completed this year, HDBank will have the highest chartercapital growth in the local banking industry.
TPBank is also planning to issue shares to increase its charter capital, whichis expected to increase from nearly 8.6 trillion VND to more than 10.6 trillionVND. To meet the plan, TPBank will issue more than 181 million shares and issuenearly 34 million shares under an employee stock ownership programme.
Many other banks, such as MB, SCB and VietA Bank are also planning toraise capital using the measure.
While increasing stock dividend to hike capital is the fastest solution at thismoment due to the impacts of COVID-19, experts forecast it would be uneasy todo as it needed approval from the banks’ shareholders. In fact, in the currentsituation, it is difficult to raise capital right from existing shareholders,let alone potential investors, including foreign investors.
From the beginning of the year until now, due to the outbreak of the pandemic,all economic sectors and industries have slowed and faced challenges to raisecapital.
“There are only some four months left this year while the country has toresolve the second wave of the COVID-19 outbreak in some localities, causingdifficulties for sectors, including banking, to raise capital. It, therefore,challenges banks to meet their capital increase plans set early this year,”banking expert Nguyen Tri Hieu said.
Despite the challenges, Hieu said the application of the capital adequacy ratioBasel II standards should follow the SBV’s roadmap this year, explaining thatthe more challenges the banking system faced, the more transparency neededto be improved.
“The COVID-19 pandemic will be one of the tests to prove the resilience of thecountry’s credit institution system to difficulties. Meeting Basel II standardsis also a confirmation of the banks’ financial strength and reputation,” hesaid.
As for State-owned banks Agribank, Vietcombank, VietinBank and BIDV, the SBV’sGovernor Le Minh Hung recently directed agencies to work with relevant ministries toincrease charter capital for the banks.
While Agribank might be allowed to increase capital using the State budget,VietinBank and Vietcombank expect to get the hike through paying dividendsin shares.
At the end of 2019, the average CAR of the four State-owned banks according toBasel I standards was only 9.4 percent, slightly higher than the prescribedminimum CAR of 9 percent. This level is much less than the CAR of privatejoint-stock banks (12.1 percent) and lower than the average CAR of the entiresystem of credit institutions (13 percent).
Notably, industry insiders said if calculating based on Basel II standards, theCAR of the banks would fall below 8 percent./.
To meet the capital adequacy ratio (CAR) of the international banking standardBasel II as required by the State Bank of Vietnam (SBV), many State-owned andprivate commercial joint-stock banks approved plans to increase capital earlythis year.
However, the pandemic might ruin their plans, especially for banks thatdidn’t report high profit last year. It has been reported that only a fewbanks, including ACB and Bac A Bank, have succeeded in their capitalincrease plans to date.
Recently, ACB was among few banks to complete the charter capital hike from 16.63trillion VND (713.73 million USD) to nearly 21.62 trillion VND through issuingshares at a rate of 30 percent to pay dividends in 2019.
Bac A Bank also increased its charter capital from 6.5 trillion VND to 7.1trillion VND by issuing 58.5 million additional shares to pay dividends, with aratio of 9 percent.
Some other banks expect to do the same to increase their capital in theremaining months of this year as it is considered the most feasible method amidthe pandemic.
HDBank announced it would issue shares to pay dividends at a rate of 50 percentand bonus shares at the rate of 15 percent, increasing its charter capital fromnearly 9.81 trillion VND to 16.088 trillion VND.
If the issuance is completed this year, HDBank will have the highest chartercapital growth in the local banking industry.
TPBank is also planning to issue shares to increase its charter capital, whichis expected to increase from nearly 8.6 trillion VND to more than 10.6 trillionVND. To meet the plan, TPBank will issue more than 181 million shares and issuenearly 34 million shares under an employee stock ownership programme.
Many other banks, such as MB, SCB and VietA Bank are also planning toraise capital using the measure.
While increasing stock dividend to hike capital is the fastest solution at thismoment due to the impacts of COVID-19, experts forecast it would be uneasy todo as it needed approval from the banks’ shareholders. In fact, in the currentsituation, it is difficult to raise capital right from existing shareholders,let alone potential investors, including foreign investors.
From the beginning of the year until now, due to the outbreak of the pandemic,all economic sectors and industries have slowed and faced challenges to raisecapital.
“There are only some four months left this year while the country has toresolve the second wave of the COVID-19 outbreak in some localities, causingdifficulties for sectors, including banking, to raise capital. It, therefore,challenges banks to meet their capital increase plans set early this year,”banking expert Nguyen Tri Hieu said.
Despite the challenges, Hieu said the application of the capital adequacy ratioBasel II standards should follow the SBV’s roadmap this year, explaining thatthe more challenges the banking system faced, the more transparency neededto be improved.
“The COVID-19 pandemic will be one of the tests to prove the resilience of thecountry’s credit institution system to difficulties. Meeting Basel II standardsis also a confirmation of the banks’ financial strength and reputation,” hesaid.
As for State-owned banks Agribank, Vietcombank, VietinBank and BIDV, the SBV’sGovernor Le Minh Hung recently directed agencies to work with relevant ministries toincrease charter capital for the banks.
While Agribank might be allowed to increase capital using the State budget,VietinBank and Vietcombank expect to get the hike through paying dividendsin shares.
At the end of 2019, the average CAR of the four State-owned banks according toBasel I standards was only 9.4 percent, slightly higher than the prescribedminimum CAR of 9 percent. This level is much less than the CAR of privatejoint-stock banks (12.1 percent) and lower than the average CAR of the entiresystem of credit institutions (13 percent).
Notably, industry insiders said if calculating based on Basel II standards, theCAR of the banks would fall below 8 percent./.
VNA
