Trang Chủ
Almost all commercial banks are proposing to hike chartered capital. NamA Bank aims to raise chartered capital from 3 trillion dong to 3.7 trillion dong; Orient Commercial Bank from 3.234 trillion dong to 4 trillion dong; VietABank and ABBank to 5 trillion dong both. Despite the recent hike to 5 trillion dong, DongABank is of intention to have it increased to 6 trillion dong in the second quarter.
Like small banks, giants have been hunting ways to scale up chartered capital. Chair of the management board of Sacombank Dang Van Thanh said its chartered capital was projected to surge 17 percent from 10.047 trillion dong to 11.7 trillion dong for this year. Likewise, ACB has recently given the green light to raise capital from 9.377 trillion dong to 12.377 trillion dong, which would be financed by undistributed profits, charter capital supplementary reserve fund and public share offering.
Assumingly, the motive lies in the ambition to build up internal capacity and expand lending. However, it could probably be soaring bad debts and the risks of being acquired and merged that provoke such hikes.
Given the robust trend of mergers and acquisition (M&A), commercial banks particularly listed ones would be well aware of exposure to acquisition which could somehow be avoided by scaling up capital, said a securities expert. “Apart from small banks that are threatened to be acquired, larger ones may feel the necessity of building up financial capacity for better advantages in negotiation”, he added.
Normally, credit institutions scale up charter capital by issuing additional shares or paying dividends in shares. However, this year’s economic difficulties accompanied by gloomy stock market would make it difficult to encourage further purchase from existing shareholders and guarantee successful public share offerings.
With relevant experiences in American banks, Nguyen Tri Hieu predicted potentially low profitability of additional mobilised capital for the time being. “Excessive capital would mean enormous pressure from shareholders and investors both. In the meantime, the number of sound and creditworthy borrowers is limited”, he added.
The phenomenon was also observed a few years ago when loosening lending on profit pressures resulted in overheating credit growth and mounting bad debts, said an expert. “In addition to capital build-up, it is important to develop strategies for effective deployment in order to hamper excessive lending or risky businesses”, he warned.
