In order to meet the roadmap to improve financial capacity and Basel II standards, small and medium-sized banks had been planning to increase their charter capital for many years. However, it was still challenging to carry out successfully.
On July 29, the State Bank of Vietnam (SBV) issued Document No. 5456/NHNN-TTGSNH approving Bac A Commercial Joint Stock Bank (Bac A Bank) to increase its charter capital from 6.5 trillion dong to 7.085 trillion dong according to the plan approved at the Annual Shareholders’ Meeting of the Bank on June 26, 2020. This document took effect within 12 months from the date of signing. The implementation source was taken from the remaining profit after tax of Bac A Bank in 2019, after setting up the funds. The additional charter capital was expected to be allocated, in which 30 billion dong would be used for investment in fixed assets and network development, 10 billion dong would be for other investments and 545 billion dong would be to provide credit to customers belonging to the priority areas under the direction of the bank.
Since raising its charter capital by legal capital in 2010 to 3 trillion dong, four years later, Bac A Bank had increased by 700 billion dong in 2014. The charter capital had dripped risen. By the end of 2019, the bank would reach 6.5 trillion dong by issuing 100 million shares to pay dividends and increase equity capital from equity sources.
BAB shares of Bac A Bank officially traded on Unlisted Public Company Market (UPCoM) from December 28, 2017, at the reference price of 20,000 dong per share. On the opening price on August 13, BAB shares were at 18,300 dong per share.
Nam A Commercial Joint Stock Bank (Nam A Bank) had also been approved by SBV to increase its capital to 7 trillion dong by paying share dividends, issuing private placement of share to increase capital according to the plan approved by the 2020 annual shareholder meeting held on June 27. According to the report of the Board of directors of Nam A Bank, in 2019, Nam A Bank’s consolidated pre-tax profit was 925 billion dong, reaching 116 percent of the plan for 2019. The bank’s undivided profits as of the end of the year 2019 were 622 billion dong, so Nam A Bank’s Board of directors had deducted 570 billion dong of profit to pay stock dividends. In 2019, Nam A Bank was allowed to raise its charter capital from more than 3.353 trillion dong to 5 trillion dong, and the bank had increased its capital successfully in the first phase to more than 3.89 trillion dong.
Currently, Nam A Bank was in the process of completing the second capital increase in 2019 to 5 trillion dong. Nam A Bank’s Board of directors said that after completing the above plan, the bank would deploy the strategy to increase capital to 7 trillion dong with the expected plan of issuing 57 million shares to pay 14.65 percent dividend, in which 143 million shares were offered for private placement. The Board of directors would decide the specific date of issuance after receiving the approval of the issuance plan by SBV and the State Securities Commission of Vietnam (SSC).
Similarly, at VietNam Asia Commercial Joint Stock Bank (Viet A Bank), after many years of missed appointments, SBV finally allowed the bank to raise capital from nearly 3.5 trillion dong to over 5 trillion dong in Q1/2020. Viet A Bank planned to offer existing shareholders nearly 150.5 million shares at the issue price of 10,000 dong per share. The offering price determined at the book value as at 31/Dec/2018 was 12,099 dong per share on the 2018 audited consolidated financial statement.
The expected issuance time was decided by the Board of directors of Viet A Bank after being approved by SBV and SSC. The bank’s shareholders had passed the above plan to increase the capital of Viet A Bank since 2013; however, until then, there was no implementation in reality.
Meanwhile, at Saigon Bank for Industry and Trade (Saigonbank), although SBV has approved the plan to raise capital from more than 3 trillion dong to 4 trillion dong since mid-2014, so far the plan had yet been deployed. The reason was that the operation of Saigonbank in recent years had been ineffective, bad debt had increased. Besides, the other reason lied on the pressure to divest capital from major shareholders, such as Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), and the Hochiminh City Party Committee in the next time.
Previously, there was information that Saigonbank would be merged into Vietcombank. However, the merger was soon unsuccessful because one of Saigonbank’s major shareholders, Hochiminh City Party Committee, did not approve the deal. However, after many years of self-restructuring with its own internal strength, Saigonbank had yet to gain new momentum, in which even the plan to raise capital could not be deployed. So far, the charter capital of Saigonbank was only slightly higher than the legal capital of 3.080 trillion dong.