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Banks seek to raise prescribed capital   2009-04-07 - VNS

Bank shares could become less attractive if local banks decide to increase their capital sources at a time when their profits are low, according to industry experts.

The recent financial turmoil has adversely affected banks and cut into their capital base, they said.

Many local banks still have plans to increase their capital to meet the central bank’s requirement for banks to have at least VND3 trillion in prescribed capital by 2010.

The HCM City Housing Development Commercial Joint Stock Bank (HDBank), for example, will increase its current prescribed capital of VND1.55 trillion to VND3 trillion, an increase of 93 per cent.

The legal capital of Sai Gon Commercial Joint Stock Bank is to be raised from the current VND2.047 trillion to VND3.374 trillion, while that of the Viet Nam International Commercial Joint Stock Bank will be increased from VND2 trillion to VND 3 trillion.

The Ha Noi Housing Development Commercial Joint Stock Bank (Habubank) is also poised to raise its charter capital from VND2.8 trillion to VND3 trillion.

Independent market experts said that local banks were racing to increase their legal capital in order to reach the prescribed-capital target requested by the central bank.

For major banks, the target does not create any additional pressure, but many banks with a small capital base must generate capital to satisfy the central bank’s capital requirement.

Dominic Scriven, Managing Director of the Dragon Capital, said the policy of asking banks to increase their prescribed capital was appropriate because the country had integrated with the international economy.

Scriven, however, said the local securities market was still weak, and as a result, bank income raised from shares has been very low.

To attract sufficient capital, local banks must persuade investors to believe in a bright future, he said.

Other experts said local banks would have to issue more shares but that it would not be an easy task.

The local banking system this year will continue to face difficulties, experts have predicted.

Even though no bank has declared a loss, income from last year was quite low, they added.

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