Major Vietnamese banks rush for share issuances to raise charter capital

Major banks in Vietnam like BIDV, Vietcombank, and VietinBank, all state-controlled, are preparing to issue billions of shares in the near future to strengthen their capital base and meet capital adequacy ratio (CAR) requirements.

HDBank (HoSE: HDB) has announced a plan to issue 582.5 million shares for dividend payout at a ratio of 20% (shareholders will receive 20 new shares for every 100 shares they own).

The private bank will use retained earnings after-tax, accumulated in its 2023 audited consolidated financial statements after setting aside provisions, to buy back the shares at par value for distribution to shareholders.

The proceeds will help the creditor raise its chartered capital. The record date for shareholders eligible for the dividend is set for December 12.

BIDV (HoSE: BID) has approved a plan to issue nearly 1.2 billion shares at a ratio of 21% to raise its charter capital from VND57 trillion to VND69 trillion ($2.72 billion).

The new shares will be issued as dividends, using the bank's remaining after tax profit in 2022, following fund allocations. The issuance is expected to take place between Q4/2024 and Q1/2025.

Vietcombank (HoSE: VCB), the largest bank in Vietnam, has received approval from the National Assembly, the country's legislature, to increase its charter capital by VND27.67 trillion to VND83.56 trillion ($3.29 billion) by issuing 2.77 billion shares at a ratio of 49.5%.

Vietcombank currently holds the largest retained earnings in the banking sector, with VND102 trillion as of the end of Q3/2024, nearly double its current charter capital of VND55.89 trillion ($2.2 billion).

After the capital hike, Vietcombank will reclaim its position as the bank with largest charter capital in Vietnam, surpassing VPBank and Techcombank.

On November 16, LPBank (HoSE: LPB) successfully held an extraordinary general meeting, where shareholders approved a plan to increase the lender’s charter capital to VND29.87 trillion ($1.18 billion).

The bank will issue approximately 430 million new shares at a rate of 16.8% as dividends, using its retained earnings as of December 31, 2023.

Currently, the minimum capital adequacy ratio (CAR) for commercial banks is set at 8%. However, under Decision No. 412/QD-TTg signed by the Prime Minister in March 2022, the government has set a goal to raise the CAR to 11-12% during 2021-2025, and maintain a minimum of 12% by 2030.

A recent report by VPBank Securities noted that as of June 30, 2024, the highest CAR ratios in the banking sector are held by private lenders that have recently completed significant capital hikes, such as VPBank, Techcombank, and SeABank.

In contrast, state-controlled banks like VietinBank, BIDV, and MBBank still face difficulties in raising capital due to cumbersome procedural requirements.

On December 31, 2023, BIDV’s standalone CAR stood at 8.85%, just meeting the minimum requirement set by the State Bank of Vietnam (SBV). However, in order to meet the capital adequacy target set by the government, the bank plans to continue raising its capital.

Similarly, VietinBank had a CAR of 9.3% at the end of 2023. The bank has received approval from the SBV and the Ministry of Finance to use all of its retained earnings from 2022 (VND11 trillion or $433.2 million) to hike its capital via dividends in shares at a rate of 21.4%. The bank is also seeking approval to use its retained earnings from 2023 (VND9 trillion) for a further 16.8% capital hike.

Meanwhile, Sacombank (HoSE: STB) has the lowest capital adequacy ratio in the sector, standing just above the regulatory minimum by 99 basis points, as it is still in the process of restructuring, having maintained a charter capital of VND18.85 trillion ($742.35 million) for the past nine years.