Vietnamese banks’ charter capital surged in 2021
Banks increased their charter capital by more than VND110 quadrillion in 2021 - the highest annual growth to date - to enhance financial strength and meet the central bank’s regulations.
A BIDV office in Ha Noi. By the end of last year, BIDV was the bank with the largest charter capital in the Vietnamese banking system.
More than 20 banks, such as Vietcombank, VietinBank, BIDV, SHB, VPBank, TPBank and OCB increased their charter capital last year. Only Techcombank and Sacombank didn’t follow suit.
The bank with the strongest capital increase last year was VPBank. It raised charter capital from VND25.3 trillion to more than VND44.4 trillion through paying dividends in shares and issuing bonus shares for existing shareholders at a total rate of 80 per cent. The surge helped VPBank surpass Techcombank to rank fourth instead of seventh position in terms of charter capital in the country’s banking system.
Three other banks, which also issued more than one billion shares each to increase their charter capital by more than VND10 trillion in 2021, were BIDV, VietinBank and Vietcombank. Last year was the first time the three State-owned banks had been allowed to pay dividends in shares to increase capital, after a long time proposing the plan to the Government and the State Bank of Viet Nam (SBV).
By the end of last year, BIDV was the bank with the largest charter capital in the country’s banking system. After issuing more than 1 billion shares to pay dividends at the rate of nearly 25.8 per cent, BIDV’s charter capital increased to VND50.5 trillion, up more than VND10.3 billion in early 2021.
It was followed by VietinBank with more than VND48 trillion after the bank completed the issuance of nearly 1.1 billion shares to pay dividends at the rate of more than 29 per cent.
Industry insiders said banks had to increase charter capital strongly last year as they have to prepare to meet the central bank’s regulation. Banks must have their capital adequacy ratio (CAR) to meet Basel II standards as prescribed in the SBV’s Circular 41/2016/TT-NHNN by January 1, 2023. Up to now, 16 out of 35 banks have met the requirement.
Besides meeting the central bank’s regulation, the capital increase will also contribute to improving banks’ financial strength and helping them increase medium and long-term capital sources to expand business activities. Therefore, the race to increase charter capital among banks is forecast to continue strongly in 2022.