The top 10 ranks of banks’ chartered capital this year would have a significant change if the banks’ plans succeeded.
Increasing charter capital continued to be the focus of the shareholders’ meeting of banks this year. With the relatively high retained earnings from previous years, all banks preferred to pay stock dividends to increase capital instead of cash dividends. The top 10 banks with the largest chartered capital currently had eight banks looking to improve their wealth in 2020.
Currently, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) was the bank with the highest chartered capital of the system with 40.22 trillion dong but still wanted to increase. Specifically, BIDV’s Annual General Meeting of Shareholders on March 7 approved the plan to raise capital in two ways. Firstly, BIDV would issue shares to pay dividends in 2019 at a rate of seven percent, expected to be implemented in Q3-Q4/2020. Secondly, the bank planned to offer 341 million shares individually or public offering, or an 8.5 percent issuance rate, in the period from 2020 to 2021. If the plan were implemented, BIDV’s chartered capital would increase by 6.23 trillion dong to 46.45 trillion dong (up 15.5 percent compared to the end of 2019).
Besides, BIDV also said it would continue to submit to the competent state authority to approve the plan to issue shares under the employee choice program (ESOP) and issue convertible bonds.
Three other state-owned commercial banks, including Vietnam Bank for Agriculture and Rural Development (Agribank), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), and Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), also wanted to increase capital this year. In particular, VietinBank was waiting for Decree 91 and Decree 32 of the Government to be amended to officially increase capital from retained earnings from 2017 to 2018. However, the specific plan to raise the capital had not been announced. Reportedly, the remaining profit after setting up funds from 2017 to 2018 of VietinBank was about more than 7 trillion dong.
Vietcombank then submitted to shareholders a plan to raise capital quite spectacularly, according to two components, issuing shares to pay dividends and issuing privately to investors. The expected dividend rate was 18%; the number of shares issued individually was less than 241 million shares. If both of these options were successful, Vietcombank would raise its chartered capital to 46.174 trillion dong, most likely surpassing VietinBank and second only to BIDV.
However, the plan to increase capital from retaining profits or stock dividends by the three banks mentioned above must wait for many procedures, with the consent of the Government, relevant ministries, and branches.
Agribank seemed to raise capital more efficiently. On June 8, the State Bank of Vietnam (SBV) ‘s Governor Le Minh Hung officially authorised the Prime Minister to submit to the National Assembly the additional charter capital of 3.5 trillion dong this year. If the capital increase were successful, Agribank’s charter capital would increase to 34.091 trillion dong.
Despite the capital increase, Agribank was still ranked fifth in terms of charter capital, lower than Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), although Techcombank only increased its capital by nearly 50 billion dong from issuing ESOP shares this year. Currently, the charter capital of Techcombank reached over 35 trillion dong.
By the end of May, the rankings from the 6th to the 10th position in the charter capital of the banking system were respectively Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), Military Commercial Joint Stock Bank (MBBank), Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank), Saigon — Hanoi Commercial Joint Stock Bank (SHB), and Asia Commercial Joint Stock Bank (ACB). However, if the capital raising plan were successful, this ranking would have a strong disturbance because Sacombank and VPBank did not have the intention to increase charter capital this year.
Specifically, at the Annual General Meeting of Shareholders held on June 24, MBBank’s Board of Directors would submit to shareholders the plan to increase the charter capital from 23.37 trillion dong to 27.988 trillion dong through the issuance of shares to pay a dividend of 15%, implemented in Q3-Q4/2020. Accordingly, MBBank’s charter capital would exceed VPBank (25.299 trillion dong).
SHB and ACB also wanted to pay share dividends at the rate of 10 percent and 30%, respectively, to increase their charter capital to 19.313 trillion dong and 21.615 trillion dong.
Sai Gon Joint Stock Commercial Bank (SCB) planned to increase its charter capital from 15.232 trillion dong to 20.232 trillion dong via a private placement. Specifically, the bank would offer 500 million shares at par value (10,000 dong per share) to existing shareholders owning 0.5 percent of charter capital or more, as well as investors in domestic and foreign.
If SHB, ACB, SCB successfully raised capital, they would knock Sacombank out of the top 10 banks with the largest chartered capital. SHB from the 8th place would drop to the 10th, ACB would rise to the 8th, SCB would be the 9th.
Another bank also planned to increase capital sharply to 65 percent this year was Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank). The General Meeting of Shareholders of this bank recently agreed to increase the capital from less than 10 trillion dong to over 16 trillion dong through paying dividends and bonus shares at a total rate of 65%.
However, not all capital raising plans could be successfully implemented, especially in the context of unpredictable context this year. The private offering also depended on the stock market was looking for investors.
Not only large banks and mid-sized banks but small banks were also aggressively raising capital this year because it was coming to the deadline to meet Circular 41 on capital adequacy ratio, according to Basel II. For example, Southeast Asia Commercial Joint Stock Bank (SeABank) wanted to increase capital to more than 12 trillion dong, Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) increased its capital to more than 11.3 trillion dong.