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| Local banks may face challenges when raising their chartered capital this year |
The central bank has sounded the final call for passengers to join the banking flight, placing additional pressure on lenders with chartered capital under the standard level.
Local credit institutions have to submit their increased chartered capital plans to the State Bank before March 31. The plans should specify the progress of lenders in raising chartered capital in 2009 and the appropriate measures for reaching the target in 2010.
December 31, 2010 is the deadline for commercial joint stock banks and central credit funds increasing their chartered capitals to a minimum of VND3 trillion ($162.1 million). The minimum requirement for foreign bank branches in Vietnam is $15 million, for financial company VND500 billion ($27 million) and for other policy and development banks VND5 trillion ($270 million).
According to Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission, local banks could face certain challenges to raise their chartered capital in 2010. “They should try to issue convertible bonds, call for new strategic shareholders and raise stakes held by current institution shareholders,” said Nghia. So far, the country has 43 commercial joint stock banks.
Le Van Phu, first deputy general director of Indovina Bank, said the bank had its two large shareholders, comprising Vietnam Bank for Industry and Trade (VietinBank) and Cathay United Bank (CUB) in Taiwan, supporting the raise, and it was much easier.
“The smart way to reach the finish is by balancing between long-term and standard convertible bonds, as seeking funds from just the stock market is not very easy,” said Nghia. According to an official from the small-size lender TrustBank, TrustBank has tried to find foreign strategic shareholders, but the global financial crisis in 2009 made foreign investors hesitant to invest in banks.
Meanwhile, an official from VietBank with current chartered capital of VND1 trillion, was waiting for a general shareholder meeting in the first quarter of 2010 to decide how to raise chartered capital. In 2009, over 20 banks received approval from the State Bank to increase their chartered capital. However, so far, more than 20 banks are still running with chartered capital of less than VND3 trillion ($162.1million).
According to financial experts, tough competition in the banking market had placed additional pressures on small-scale banks trying to hike their chartered capital. “Big banks with chartered capital of over VND3 trillion are trying to further increase their chartered capital. With better performances and reputations, of course, their convertible bonds and shares are much more attractive to investors than the bonds and shares of small-scale banks,” said a financial expert.
Sacombank, for instance, has plans to raise its chartered capital to VND9.8 trillion ($529.7 million) from the current VND6.7 trillion (362.1 million).