State-owned banks to retain dividends for capital hike
Authorities have basically agreed on the State Bank of Vietnam (SBV)’s proposal to allow large State-owned commercial banks to retain their dividends or pay them in shares to increase capital.
VietinBank is in dire need of capital that has remained unchanged since 2014. (Photo: VietinBank)
Hanoi (VNS/VNA) -Authorities have basically agreed on the State Bank of Vietnam (SBV)’s proposalto allow large State-owned commercial banks to retain their dividends orpay them in shares to increase capital.
The proposal, however, stillneeds approval from the National Assembly. To ratify the proposal,the NA will have to either revise existing regulations or issue a newresolution on the issue.
According to the proposal,State-owned commercial banks, including Agribank, BIDV, VietinBank andVietcombank, will be allowed to hold on to dividends which are supposed tobe paid to the State budget to increase their charter capital
Currently, the banks are notpermitted to retain their dividends. Representatives of State capital at thebanks are usually required to vote for dividend payout to be paid in cashat the banks’ annual general meetings for the State to receive moneyfrom dividends.
However, the banks are undergreat pressure to hike capital to satisfy Basel II standards. UnderSBV regulations, banks must maintain a capital adequacy ratio (CAR)of at least 8 percent as per Basel II norms starting in 2020.
The CAR of the banks will fail toreach the minimum level set by the SBV if they fail to increase capital.
Raising capital has been astruggle for Vietnamese banks in recent years. BIDV has charter capital ofnearly 34.19 trillion VND (1.46 billion USD) – unchanged since 2015, and it isthe same for VietinBank with capital remaining unchanged since 2014 at 37.23trillion VND (1.59 billion USD).
Vietcombank, the largest listedbank in the country, last month raised 6.2 trillion VND (265 million USD) fromselling a 3 percent stake to foreign investors as part of its plan toultimately sell a 10 percent stake.
Fitch Ratings estimated theVietnamese banking system could face a capital shortfall of almost 20 billionUSD, equal to 9 percent of GDP, to meet Basel II and increase allowancecoverage to a level that reflected underlying asset-quality problems.
Moody’s also noted that mostVietnamese banks would still lack sufficient capital to meet the Basel IIrequirements, so raising capital would be a key focus for banks in 2019.-VNS/VNA
The Government is directing ministries and agencies to raise capital for State-owned commercial banks through the use of dividends or share sales this year, Deputy Prime Minister Vuong Dinh Hue said at a recent meeting.
Many banks have issued a large amount of bonds to raise capital in a move to meet high demand during year-end’s peak lending season and prepare to meet the State Bank of Vietnam (SBV)’s regulations on tightening the use of short-term funds for long-term loans from early next year.
Vietnamese banks are forecast to gain in profitability this year, but raising capital will be a key focus for banks to meet the State Bank of Vietnam’s strict Basel II requirements.
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VietinBank is in dire need of capital that has remained unchanged since 2014. (Photo: VietinBank) 
