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Small banks: Increase chartered capital or merge?   2008-11-03 - TBKTVN

Commercial banks have only two months left to raise their chartered capital to VND1tril. Those banks that cannot reach VND1tril ($62.5mil) will have to be merged into other banks.


According to the State Bank of Vietnam, as of the end of October 2008, Vietnam had nine joint-stock banks that had to increase chartered capital to VND1tril: First Joint Stock Commercial Bank (FCB), which now has the chartered capital of VND609bil ($38.06mil), Gia Dinh Bank (VND500bil or $31.25mil), Pacific Bank (VND566bil or $35.37mil), My Xuyen Bank (VND500bil or $31.25mil), PG Bank (VND500bil or $31.25mil), Kien Long (VND580bil or $36.25mil), Vietnam Thuong Tin Bank (VND500bil or $31.25mil), Dai Tin (VND504bil or $31.5mil) and Dai A (VND500bil or $31.25mil).


Nguyen Van Giau, Governor of the State Bank of Vietnam, said that banks have been following necessary procedures to raise chartered capital. Some banks which plan to issue shares to the public are waiting for the State Securities Commission to approve their share issuance plans.


While big banks can put their minds at ease as they already have VND1tril in chartered capital, small banks are now like cats on hot bricks. They have to get VND1tril in chartered capital by early 2009 and are finding it a tough ask.


Vu Duc Nghia, Deputy General Director of Bien Viet Securities Company, said that it is really difficult to increase chartered capital at this moment.


“The prices of many bank share items on the OTC market have been falling to below face value, while there have been very few transactions,” Nghia said.


The analysis division under Euro Capital said that it is now not a favourable time for banks to increase chartered capital by issuing shares to the public.


They said that if banks issue shares, in all likelihood the share issuances will not attract investors, and investors will doubt the banks’ capacities.


Meanwhile, Nguyen Tri Thanh, Deputy General Director of Gia Phat Securities Company, asked: “Why don’t banks think of merging into each other to become bigger and more competitive?”


“Merging small banks has been successfully carried out in some countries neighbouring Vietnam like Malaysia, Thailand and the Philippines,” Thanh said.


Nghia from Bien Viet said that the State Bank of Vietnam should consider delaying the deadline for raising capital in order to minimise risks for banks.

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