The ‘big four’ banks thirsty for foreign capital

Initial encouraging results have occurred after efforts were made to reduce the need for capital from banks where the state holds the controlling stake.

A South Korean investor has finally become a shareholder of the bank which has the biggest total assets in Vietnam with 15 percent of shares. BiDV has confirmed that it would issue 603 million shares to KEB Hana Bank, worth VND20.3 trillion.

The ‘big four’ banks thirsty for foreign capital



As officially stated, the shares are issued at the price of VND33,640 per share. Meanwhile, the market price of the bank share is around VND35,200 per share, the same as early this year, but increasing by 42 percent compared with the same period last year.

The deal caught special attention from the public because of its value, the highest so far,$875 million that helped raised its charter capital from VND34.187 trillion currently to VND40.22 trillion.

In 2011, another state-owned bank, one of the big four, sold 15 percent of shares to Mizuho in a deal valued at $567 million. Meanwhile, Tokyo-Mitsubishi UFJ (BTMU) only had to spend $743 million only to acquire 20 percent of VietinBank in 2012.

The deal caught special attention from the public because of its value, the highest so far,$875 million that helped raised its charter capital from VND34.187 trillion currently to VND40.22 trillion.

 However, analysts commented that the amount of capital is not big enough to stop the bank’s thirst for capital. Being one of the banks leading in lending and total assets, BIDV needs more capital to expand its operations.

 


According to SSI, BIDV’s CAR was low at the end of 2018, just 9 percent according to Basel I.

Other state owned banks and private banks also want to increase capital to satisfy the new requirements on capital adequacy ratio.

Prior to that, the State Bank of Vietnam (SBV) confirmed that all the four state owned banks were meeting difficulties in raising their charter capital, and the banks’ CAR was approximately 9 percent only.

The charter capital of the banks by the end of March reached VND152 trillion, an increase of 0.73 percent compared with December 2018, while the total assets reached VND5,000 trillion, and bad debt ratio 1.51 percent.

Since the State holds the controlling stake in the banks, the capital increase heavily depends on the state as the biggest shareholder. Meanwhile, different ministries set different regulations, which may create problems for the share sale.

Since 2016, BIDV and VietinBank many times plan to pay dividends in shares instead of cash, so as to have money to increase charter capital. However, the plan was rejected by the Ministry of Finance, which said the state budget was scanty and needed money.

In case of BIDV, the state’s ownership ratio in the bank has reduced to the minimum level of 65 percent, while the foreign ownership ratio has hit the maximum level.

Thanh Lich 

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