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Vietcombank plans rights issue for small shareholders only   2009-05-07 - TN

Vietcombank is seeking the central bank’s permission to make a rights issue for the benefit of the small shareholders who have seen their investment shrivel since the heady days of the bank’s IPO in 2007. 

 

 
The proposal for the VND1.122- trillion (US$63.1 billion) rights issue, which will increase the number of outstanding shares by 9.28 percent if it proceeds, was passed at last month’s annual general meeting.

 

State Capital Investment Corporation (SCIC), which owns 90.72 percent of Vietcombank’s shares, will not take part in the rights issue, for which the price will be the standard VND10,000 per share.

 

Vietnam’s third biggest lender by assets, officially known as the Joint Stock Commercial Bank for Foreign Trade of Vietnam (OTC stock code: VCB), has chartered capital of VND12.1 trillion ($681 million).

 

This figure is barely 81 percent of the target set before the initial public offering in late 2007, the directors told shareholders.

 

Low reserves coupled with an increase in lending and investment caused Vietcombank’s capital adequacy ratio to fall by 2.3 percent to 8.9 percent last year.

 

In addition, the State Bank of Vietnam limits a bank’s total investment in other businesses, including its subsidiaries, to less than 40 percent of the chartered capital.

 

The restriction means that Vietcombank can use less than VND1 trillion ($56.2 million) for this purpose.

 

“The state-owned shareholder (SCIC) will not suffer any loss as it won’t be buying the rights,” said a senior official of the bank who asked to remain anonymous.

 

“Besides, the government made more than VND10 trillion ($562 million) from the IPO. We hope it will allocate a small portion of that huge amount so that we can issue bonus shares to existing shareholders at a rate of one for one,” he said.

 

When it went public, Vietcombank sold 97.5 million shares to investors at VND107,572 ($6.05) per share.

 

Soon afterwards, it sold shares to its employees at the special price of VND64,500 ($3.6).

 

Their ebullience along with Vietcombank’s share price collapsed last year as the stock market went into a 66 percent nosedive and the OTC market followed it all the way down.

 

On Wednesday, the price stood at VND43,500 in the OTC market, according to FPT Securities.

 

If it is fully subscribed, the rights issue will raise the proportion of Vietcombank shares in private hands enough to meet the Ho Chi Minh Stock Exchange’s minimum listing requirement of 20 percent.

 

“Because Vietcombank’s plan is unprecedented, it has to ask for the government’s permission,” said SCIC General Director Tran Van Ta.

 

Vietcombank plans to revive its listing plan this year after a delay in June amid the economic slowdown, Bloomberg reports.

 

The lender won initial approval from the Ho Chi Minh City bourse on April 1 to list about 112.3 million shares, Bloomberg quotes chairman Nguyen Phuong Binh.


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