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Bank capital requirement increases begin   2010-09-07 - Dau tu

The Government is requiring that commercial banks have until December 31, 2010 to increase their chartered capital holdings to three trillion dong.  Since banks do not have much time, they should issue shares to raise capital now, even though the stock market remains anemic.




After plans to increase chartered capital holdings gained approval from the State Bank of Vietnam, many small and medium-sized banks are pushing for the issuance of shares to fulfill capital requirements before the end of 2010.  The market should soon be welcoming the introduction of a huge volume of bank shares.


Eight banks alone (DaiABank, MeKongBank, Ficombank, VietBank, Navibank, WesternBank, GiaDinh Bank, and PG Bank) will issue a total value of sixteen trillion dong. These eight banks will have to increase their capital from one trillion dong to three trillion dong.


Besides these eight banks, other banks that now have more than one trillion dong in capital are also planning to issue shares. Saigon Bank and HD Bank have gained approval from the central bank to issue shares to raise their capital holdings from 1,500 billion dong to three trillion dong, while Ocean Bank has received permission to increase capital from two trillion dong to three trillion dong.


Even those banks that already have chartered capital holdings greater than three trillion dong have joined the race to issue shares.


It is estimated that from now until the end of the year, commercial banks need to raise 51 trillion dong.  Analysts have warned that bank share prices will not remain high and may even decrease considerably from current levels.


General Director of a HCM City-based bank admitted his bank’s shares are now under pressure, especially after more and more bank shares are introduced into the market. “Even the share prices of listed banks are decreasing. VCB, EIB, CTG,  STB, ACB, and SHB have been slightly decreasing recently,” he said. “A huge volume of shares will be marketed, which may lead to oversupply and further price decreases.”


Small commercial banks, in their plans to issue shares, mostly target existing shareholders. Western Bank, for example, increased its chartered capital from one trillion dong to two trillion dong by issuing shares to existing shareholders at a price of 10,000 dong per share. The bank still plans to issue 100 million more shares, valued at one trillion dong, between now and the end of the year to increase its chartered capital to three trillion dong.


Most small banks that plan to issue shares this year set their sales price at 10,000 dong per share, or equal to the share’s face value.


According to Andy Ho, Managing Director of VinaCapital, an investment management company, though share prices remain low, bank shares may not attract investors.


“Before making an investment decision, investors should study carefully the prospects of each bank. However, with current price levels, many bank shares will now have prices reasonable enough for investors to purchase,” he noted.


A financial analyst said it is highly possible that bank share prices will still be decreasing in 2011 and that bank share prices will not be able to recover soon. In October 2010, new regulations set up by the State Bank will more strictly control banks and their credit activities.  Meanwhile, as Trinh Van Tuan, General Director of OCB pointed out, the majority of income for small banks comes from lending.


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