Small banks race to expand capital

Big banks can easily persuade shareholders to buy more shares in order to increase their chartered capital, but smaller banks cannot.

LookAtVietnam - Big banks can easily persuade shareholders to buy more shares in order to increase their chartered capital, but smaller banks find it difficult to do the same.

Many large banks with more than three trillion dong in chartered capital as required by the State Bank, plan to expand by increasing their chartered capital further.

Sacombank has chartered capital of 6700 billion dong, but its board of directors thinks that the stockholder equity is modest compared with other banks. Now the bank has decided to increase its chartered capital from 6700 billion dong to 9179 billion dong in 2010.

To raise this much capital, Sacombank plans to pay dividends to existing shareholders in stakes instead of cash, issue more shares to existing shareholders (at 12,000 dong per share) and provide two percent of stakes to bank staff.

ACB’s board of directors will submit plans to shareholders about raising chartered capital by 1563 billion dong. Other big banks such as Techcombank and Dong A Bank both want to increase their chartered capital by 1,000-2,500 billion dong in 2010.

Financial analysts remarked that it is easy to persuade shareholders to inject more money, because these banks are all big and prestigious. Bank shares have high liquidity because shareholders can sell them on the bourse.

In contrast, smaller banks are struggling. To increase chartered capital, the board of directors at small banks must persuade big shareholders to pour in more money and also persuade smaller shareholders to accept plans to issue more shares.

Small shareholders at these banks think long and hard about what they should do with their money. They can inject more money in the stakes of a small bank or purchase shares of big banks at reasonable prices. The second option is an attractive choice.

According to Hoang Van Toan, Chair of Dai Tin, bank shareholders must be persuaded that the bank is in an important development period requiring heavy investment. They must also see great potential in the bank if they are to contribute additioncapital.

Dai Tin has successfully increased its capital from 1252 billion dong to 2000 billion dong as of March 19 and plans to expand further to have three trillion dong by the end of the year as required by SBV.

Meanwhile, another joint-stock bank, whose chartered capital has just been raised to 1800 billion dong, is not as optimistic. The general director revealed that they are negotiating with foreign partners about selling stakes to them.

“We need foreign shareholders, because it will be impossible to increase capital if we continue seeking domestic partners, especially when bank shares are not attractive to them anymore,” he observed.

24/39 operational joint-stock banks have chartered capital of less than three trillion dong. Of this amount, 15 banks have chartered capital of less than 2 trillion dong, and 8 banks have 1 trillion dong in capital No less than 10 banks have officially announced plans to list on the bourse in 2010, half of which have chartered capital of less than 3 trillion dong

Source: Thoi bao kinh te Saigon