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Vietnamese banking system sees big changes

Private banks that can satisfy the requirements on capital adequacy ratio (CAR) now have great opportunities to obtain bigger market share.

Reports showed a significant decrease in the market share held by the ‘big four’ (Vietcombank, BIDV, Agribank and VietinBank).




The big four are state-owned banks, in which the state holds more than 50 percent of chartered capital. The total assets and outstanding loans of the banks alone account for 50 percent of the entire banking system.

However, the market share has shrunk because the State has been slow in increasing the charter capital of the banks. As a result, the charter capital increase of the banks is lower than their total asset growth, leading to the decline in CAR (capital adequacy ratio).

Bizlive found that Agribank had a CAR of 9.2 percent on December 31, 2019, which was lower than the average CAR of domestic credit institutions.

However, if referring to Basel II standards, the ratio would be 7.3 percent only on December 31, 2019 and 6.9 percent on March 31, 2020, far from the required minimum ratio of 8 percent.

As for VietinBank, its CAR was 9.25 percent in late 2019 if calculating in accordance with the standards stipulated in Circular 36. Meanwhile, the figure would be much lower if calculating in accordance with Circular 41, with Basel II standards.

Private banks that can satisfy the requirements on capital adequacy ratio (CAR) now have great opportunities to obtain bigger market share.

Meanwhile, Vietcombank and BIDV could not fulfill plans to raise charter capital through the share issuance to investors and bond issuance to increase 2-tier capital.

Vietcombank could only issue 3 percent of shares out of the planned 10 percent. This was because the share price increased, which could not attract investors.

As of the end of 2019, BIDV could issue shares to KEB Hana Bank to increase the charter capital by 15 percent, or VND6.033 trillion.

Nevertheless, though the bank both issued shares to foreign strategic investor, and issued bonds to increase 2-tier capital, it still lacks a huge amount of capital to obtain growth this year.

Unable to raise capital to the expected levels, the banks may have to curb the credit growth or even have to reduce outstanding loans to ensure safety in operation.

If BIDV cannot raise capital this year, it would have to reduce outstanding loans sharply, about VND90 trillion, while the demand for capital is very high.

The credit growth slowdown of state-owned banks means the market share decreases. This also means that private banks now have opportunities to obtain bigger market share.

Some private banks have charter capital higher than state-owned banks.

Techcombank, for example, had VND35 trillion in charter capital as of the end of 2019, higher than Agribank with VND30.5 trillion, ranked fourth in the banking system.

Le Ha 


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