The long-awaited listing of many large Vietnamese banks has once again been delayed as banks wait for market conditions to improve.
Currently, there are 17 listed bank stocks in all three stock exchanges (HSX, HNX, UPCoM), which accounted for more than half of the 31 commercial Vietnamese banks in operation in Vietnam.
Unlisted banks, such as Nam A Bank, Orient Commercial Joint Stock Bank (OCB), Vietbank, to name a few, have laid the groundworks for going public for years.
At its recently held general meeting, VietBank’s board of executives has announced extending the deadline for the third time to close the list of its shareholders to file the registration and prepare for the initial public offering (IPO).
Nam A Bank followed suit by extending its own deadline for closing the shareholders' list.
Nguyen Ngoc Tam, Nam A Bank’s general director, shared the bank’s plan of going public and luring foreign stock buyers this year, and hoped for a raise of charter capital from VND3.353 trillion ($146.78 million) to VND5 trillion ($217.39 million).
OCB’s chairman Trinh Van Tuan pointed out that the gloomy stock market in late 2018 yet again put the bank's IPO plans on ice. In addition, Tuan said the bank would deploy its IPO plan in early 2019 if conditions aligned.
Commercial banks IPO’s process in Vietnam has accelerated markedly since the start of 2018, including Techcombank, TPBank, and HDBank.
However, the banking industry would face many challenges which delayed IPO plans. Sharp fluctuations on the market will make it difficult for banks to go public as well, according to industry insiders.
One top concern for lenders is raising capital to meet the capital adequacy ratio (CAR) imposed by Basel II and the SBV.
Analysts at Bao Viet Securities pointed out that listed banks need to collect at least $10 billion to ensure they satisfy CAR requirements by 2020 – a mission that lenders say they are struggling to complete.
Dang Linh Chi, partner at Baker McKenzie Vietnam, told VIR that this is a “chicken-and-egg situation”, in which Vietnamese banks need foreign capital in order to reach Basel II, while foreign investors often look for Basel II standards first before making a decision.
On the other hand, issuing a large number of shares to the market would dilute stock prices, hating up the competition on the stock market. For example, banking stocks with successful capital increase and stable non-interest revenue would attract many investors, in contrast with the stocks of small banks.
According to banking expert Nguyen Tri Hieu, challenges still colour the banking landscape and hamper IPO plans, as a result of low efficiency, low Return on Equity (ROE) and low Return on Assets (ROA) than industry average while the non-performing loans are still of high rate.
Going public means that banks have to be more transparent in their business activities and financial statement, which many banks fail to meet the norms. VIR
According to the government’s report, since more than 81 percent of the country’s public companies have charter capital of over VND30 billion, the revision thus will affect only a minority of firms.