*Failing to increase capital, small banks can just rely on M&A
Increasing financial potential is considered as a necessary and sufficient condition in the current context when the banking reform is happening strongly while competition in this sector is more intense and the application of Basel II standard is quite near. However, in the market, many banks still have the chartered capital of three trillion dong, the benchmark level, but have not submitted to shareholders for approval of the chartered capital increase plan in this year.
At the recent annual general meeting (AGM) at the end of April 2018, Viet Capital Bank had no plan on chartered capital increase for shareholders’ approval, though the bank’s capital is at the minimum level of three trillion dong.
The fact shows that since the acquisition and renaming from Gia Dinh Bank into Viet Capital Bank and the capital increase from two trillion dong to three trillion dong from the end of 2011 till now, Viet Capital Bank has not raised any more dong. Experiencing 25 years of operation, so far, Viet Capital is still hard to assert its position in the financial market.
Meanwhile, though Saigonbank submitted to shareholders for approval of the capital increase plan from three trillion dong to more than four trillion dong, it still cannot realise the goal over the last five years. Under the pressure of improving financial capacity, Saigonbank used to consider the merger and was accepted by a major partner i.e. Vietcombank. However, the aforementioned deal failed when Saigonbank’s major shareholders have not found a common voice.
However, according to a reliable source, recently, major shareholders of Saigonbank (Hochiminh city People’s Committee) have discussed the merger. In fact, without M&A, Saigonbank is difficult to stand firmly.
Some other cases that have failed to increase capital over the last many years have sought to merge. For example, PGBank approved the merger plan into HDBank, which is expected to be completed in August 2018. The swap ratio will be 1:0.621 (one PGBank share for 0.621 HDBank share). Under the pressure on increasing capital potential to meet international standards following Basel II Treaty and raising financial capacity, small banks are developing capital increase plans in large number.
In April 2018, Kienlongbank’s annual general meeting (AGM) approved the chartered capital increase plan from three trillion dong to more than 3.236 trillion dong through the share issuance to existing shareholders. The entire capital increased from the share issuance is expected to be invested in collaterals, expand operation network and supplement investment. However, the new capital after the increase is not necessarily the advantage for this bank.
In March 2018, VietBank’s shareholder meeting approved the restructuring plan and is expected to bring shares to transact on Upcom while raising chartered capital by one more trillion dong. Accordingly, in 2018, VietBank will raise more than 1.007 trillion dong capital by issuing shares to the public and selling to employees.
Chair of VietBank Duong Ngoc Hoa said in the immediate future, the bank will increase chartered capital for the first phase by about 500 billion dong and bring shares to transact on Upcom. By 2020, VietBank will officially list on Hochiminh city Stock exchange (STC).
Nguyen Ngoc Toan, Chair of Nam A Bank also said the bank has just submitted to shareholders for approval of the capital increase plan to five trillion dong, from the current 3.021 trillion dong. Accordingly, the bank will issue shares to make dividend payment at 11 percent, and the total increased capital is 332 billion dong. At the same time, Nam A Bank will issue 164.6 million common shares, at the price not lower than the par value. The issuance objects are existing shareholders (expected at 906 billion dong), bank employees (expected at more than 45 billion dong) and outsiders (about 695 billion dong).
Meanwhile, despite many years of failing to realise capital increase plan, a new investment noticed in the second half of 2017 by VietABank was the investment in PGBank the bank that has just merged into HDBank. According to the released information, VietABank spent 150 billion dong to purchase 4.16 percent stake of PGBank. As such, if holding PGBank shares, after carrying out M&A, Viet A Bank will hold 7.75 million HDBank shares. The investment is expected to bring about potential profit to Viet A Bank in the future.
In the draft plan for restructuring of the economy in 2016-2020 period chaired by the Ministry of Planning and Investment, as assigned by the government, there are objectives on strengthening of the banking sector restructuring such as reducing bad debts, numbers of commercial banks and making sure that 70 percent of banks will sufficiently carry out standards under Basel II Treaty by 2020. However, so far, among 10 pilot state-owned banks, OCB is the only bank to announce the completion of capital and risk management method under Basel II.
