In light of the unpredictable developments relating to the Covid-19 pandemic, many banks in Vietnam are attempting to raise capital but most of their plans have been delayed,
as investors are increasingly worried about the instability of the financial market, especially since investments in banks are long-term investments.
Dr. Nguyen Tri Hieu, a finance expert, stated that the Covid-19 pandemic has caused the bad debts of banks to rise while the equity of owners has dipped sharply.
By raising capital, banks will be able to efficiently deal with the increasing bad debts and bolster lending capacity. It will also help them meet the financial safety requirements of Circular No. 41 and the international Basel II Accord, according to Hieu.
Leaders of some banks in Vietnam said the impact of the pandemic will be strongly felt later this year. Some experts believed the asset quality of banks is decreasing significantly although Circular No. 1 has allowed them to restructure their debts during the pandemic.
Nguyen Xuan Thanh, lecturer at Fulbright University Vietnam, said the possibility of a financial crisis in Vietnam will depend on the banking system’s health. “If the banking system is healthy, the economy will remain resilient until the pandemic is contained. The unimpeded capital flow will help the economy recover,” he noted.
The State Bank of Vietnam has allowed several banks to raise their chartered capital. Asia Commercial Joint Stock Bank has plans to increase its chartered capital from VND16.6 trillion to VND21.6 trillion. Southeast Asia Commercial Joint Stock Bank has been allowed to raise its chartered capital from some VND9.4 trillion to VND12 trillion, while Bac A Bank is seeking to raise its chartered capital from VND6.5 trillion to VND7 trillion.
Some banks have been successful in raising their capital. The Saigon Hanoi Commercial Joint Stock Bank has increased its chartered capital to some VND17.6 trillion after issuing more than 550 million shares, while the Orient Commercial Joint Stock Bank has raised its capital from VND7.9 trillion to some VND8.8 trillion by issuing shares for Japanese partner Aozora Bank. In February, the Military Commercial Joint Stock Bank earned more than VND1.7 trillion by issuing shares, raising its chartered capital to VND24.37 trillion.
According to the SSI Securities Corporation, there were five listed banks that successfully raised their chartered capital in 2019, including the Joint Stock Commercial Bank for Foreign Trade of Vietnam and the Bank for Investment and Development of Vietnam. SGT
Not all commercial banks will list their shares on the bourses by the end of the year as required by the government.
Vietnam has seen a digital wave in the finance-banking industry, with many lenders investing significantly in digitisation, experts have said.