This intense focus on raising capital is causing constant shifts in the rankings of the largest banks, suggesting that this competitive race will continue for the foreseeable future. The dynamic banking sector in Vietnam is experiencing significant changes, driven by the necessity to strengthen financial positions and manage increasing bad debts.
Private Banks Accelerate
On June 28, Techcombank announced the issuance of 3.52 billion shares at a 1:1 ratio, meaning each shareholder who owns one share will receive one new share. This move increased the total number of shares from 3.5 billion to 7.05 billion, boosting Techcombank's charter capital from VND 35,225 billion to VND 70,450 billion. Consequently, Techcombank's charter capital jumped from 9th to 2nd among the 28 commercial banks, only behind VPBank (VND 79,339 billion) and surpassing the three giants in the Big4 group: BIDV (VND 57,004 billion), Vietcombank (VND 55,891 billion), and VietinBank (VND 53,700 billion).
At the end of 2023, VPBank also increased its charter capital to VND 79,339 billion, rising to the top of the system after completing the private placement of 15% of shares to strategic investor Sumitomo Mitsui Banking Corporation (SMBC). This significant move underscored VPBank's aggressive strategy to solidify its market position. Notably, most banks are not out of the trend of racing to increase their charter capital, as the competitive environment necessitates such actions to stay ahead.
Last March, MB completed the plan to offer 73 million shares to Viettel and SCIC, raising its charter capital from more than VND 52,140 billion to over VND 52,870 billion. Additionally, MB plans to increase its capital by VND 7,959 billion through dividends in shares and the private placement of 62 million additional shares, bringing its charter capital to VND 61,643 billion. This indicates MB's robust strategy to maintain its competitive edge in the banking sector.
LPBank plans to issue shares to increase its charter capital to VND 33,576 billion, a plan approved by the State Bank of Vietnam. OCB has been approved to increase its charter capital from VND 20,548 billion to VND 24,658 billion. VIB also plans to increase its charter capital from VND 25,368 billion to VND 29,791 billion. SeABank aims to increase its charter capital to VND 28,800 billion after completing its stock issuance. These moves by private banks highlight a significant trend of capital augmentation to support growth and enhance stability.
State Banks Cherish Big Plans
Despite losing their leading positions to private banks, state-owned commercial banks have significant plans in the pipeline to reclaim their top spots. These banks are devising comprehensive strategies to enhance their capital bases, which will not only improve their financial health but also enable them to compete more effectively with private banks.
Vietcombank announced plans to pay dividends in stocks from VND 21,680 billion of its remaining profit in 2022. Additionally, the 2023 extraordinary shareholders' meeting approved a plan to increase capital by about VND 27,700 billion from the remaining profit of 2021 and accumulated remaining profit before 2018. If successful, Vietcombank's charter capital will exceed VND 102,000 billion, marking a significant leap in its financial strength.
BIDV also plans to issue over 1.36 billion shares, increasing its capital from VND 57,004 billion to over VND 70,624 billion. With a remaining profit of more than VND 15,491 billion after setting up funds in 2023, BIDV proposes to spend VND 12,347 billion on share dividends. If approved, BIDV’s charter capital will surpass VND 86,000 billion. This ambitious plan reflects BIDV's commitment to maintaining its competitive edge and financial resilience.
Meanwhile, VietinBank has received approval from the State Bank of Vietnam and the Ministry of Finance to retain all 2022 profits (VND 11,678 billion) for capital increases through dividends in shares. With the remaining profit of VND 13,927 billion after setting aside mandatory funds and bonus and welfare funds in 2023, VietinBank shareholders have approved the plan to use all profits to pay dividends. This strategic move aims to bolster VietinBank’s financial foundation and enhance its market position.
The "Racetrack" is Full of Bumps
Statistics from 2023 show that 21 banks completed capital increases, with a total increase of more than VND 100,000 billion. This year, 23 banks have announced plans to increase their capital by nearly VND 167,000 billion. This trend of increasing charter capital is expected to continue in the coming years, driven by regulatory requirements and the need to improve financial stability.
According to data from the State Bank, by the end of May, the capital adequacy ratio (CAR) of credit institutions and foreign bank branches, applied according to Circular 41/2016/TT-NHNN, reached 12%. State-owned commercial banks had a CAR of 9.98%, joint-stock commercial banks 11.98%, and foreign banks 21.59%. Although there has been gradual improvement, these figures still fall short of international standards and regional averages. For example, the average CAR for the Philippines is 16.2%, Singapore 17.2%, Malaysia 18.3%, Thailand 18.9%, and Indonesia 23.6%. This comparison highlights the challenges that Vietnamese banks face in aligning with global standards.
To relieve pressure, banks have been issuing bonds, but by the end of May 2024, the rate for state-owned commercial banks was 24.45%, while joint-stock commercial banks were at 40.82%. This indicates a significant need for additional medium and long-term capital. Additionally, bad debt remains a pressing issue. By the end of Q1, the bad debt balance of 28 listed banks had increased by 14.4% compared to the beginning of the year, contrary to the decreasing trend seen in Q4 2023.
While new data on bad debt is not yet available, a survey by the Department of Statistical Forecasting (SBV) suggests that the bad debt/credit balance ratio showed signs of increasing slightly in Q2, rather than decreasing as previously forecasted. This ongoing pressure underscores the need for banks to continue their efforts to increase charter capital and address bad debt effectively.
