Charter capital of banks to increase sharply in 2023

Data from the State Bank of Vietnam (SBV) showed that by the end of 2022, the charter capital of the whole banking system reached VND876.99 trillion, up 13.04% over the same period last year.

The charter capital of State-owned commercial banks was VND190.43 trillion, an increase of 5.75% over the same period in 2021 and the number of joint-stock commercial banks was nearly VND469.41 trillion, an increase of 19.26% over the same period in 2021.

In a recent report sent to the National Assembly’s Economic Committee, the SBV said it is coordinating with relevant ministries and branches to consider and submit to the competent authorities a plan to increase charter capital from profits after tax and after setting aside funds in the 2021-23 period for State-owned commercial banks Vietcombank, VietinBank and BIDV; and from the State budget for Agribank.

At the same time, the SBV also directed Vietcombank, VietinBank and BIDV to develop a plan to increase charter capital from profits after tax and after setting aside funds in 2021 to submit to the Prime Minister for approval.

As for Agribank, the Government on April 25 issued a resolution on additional investment in charter capital for the bank. Accordingly, the SBV’s Governor will be authorised by the Prime Minister, on behalf of the Government, to report to the National Assembly on charter capital addition by VND17.1 trillion for Agribank in the 2021-23 period.

In order to prepare for the capital increase plan, at the general meeting of shareholders in 2023, Phạm Quang Dung, chairman of Vietcombank, said Vietcombank's capital increase plan of about 27 trillion VND will be from three sources including profit in 2020 and the remaining profit of 2019 with the issuance rate of 18.1% approved by the Government; profit of 2021; and the remaining accumulated profit before 2018.

Vietcombank’s capital increase policy was agreed upon by the SBV and the Ministry of Finance. The bank is preparing procedures to submit to the competent authorities for approval.

In 2023, BIDV plans to increase its charter capital to more than VND61.56 trillion by issuing nearly 642 million shares to pay dividends to shareholders. The source for implementation is the remaining profit in 2021 after setting aside the required funds. Accordingly, the bank’s charter capital will increase by more than VND6.42 trillion; private placement or public offering of more than 455 million shares according to a plan approved by the bank’s 2022 annual general meeting of shareholders (AGM).

VietinBank's AGM also approved a plan to increase charter capital in 2023. If the capital increase plan is successful, VietinBank's charter capital will increase from VND48.06 trillion to VND66.03 trillion.

According to the SBV’s data, by the end of January 2023, four State-owned commercial banks Agribank, Vietcombank, VietinBank and BIDV will have a total charter capital of VND180.4 trillion. With the charter capital increase plans, if successfully implemented, the charter capital of the State-owned commercial banks will increase sharply in 2023.

Meanwhile, the race to increase capital in joint stock commercial banks is more exciting as many banks have planned to increase their charter capital by trillions of Vietnamese dong. For example, VPBank is expected to increase by about VND12.2 trillion to bring its charter capital from VND67.43 trillion to more than VND79.34 trillion.

In order to achieve the goal of increasing capital, at the AGM, VPBank leaders said they would issue more than 1.19 billion shares to strategic shareholder Sumitomo Mitsui Banking Corporation and issue more than 30.2 million shares of employee stock ownership plan (ESOP). After the issuance, VPBank will become the bank with the largest charter capital in Vietnam’s banking system.

TPBank's 2023 AGM also approved a plan to increase charter capital to VND22.01 trillion. Specifically, the bank plans to increase charter capital by nearly VND6.2 trillion to VND22.01 trillion through dividend payment in shares.

At Military Bank (MB), the bank’s AGM also approved a plan to increase charter capital in 2023 by more than VND9 trillion. If the plan is favourable, the charter capital of MB will increase from VND45.34 trillion to VND53.68 trillion.

The 2023 AGM of VIB also ratified a plan to increase charter capital from nearly VND21.07 trillion to VND25.37 trillion. With the additional charter capital, VIB plans to use VND4.09 trillion to provide credit and invest in liquid assets, VND100 billion to invest in facilities and technology, and VND100 billion to invest in branch network upgrading.

SHB's AGM in 2023 also approved a plan to increase charter capital from VND30.67 trillion to more than VND36.19 trillion, while SeABank, ACB, HDBank, Techcombank and Bac A Bank also plan to increase their charter capital by more than VND5.5 trillion, VND5.06 trillion, VND3.97 trillion, VND35.22 trillion and VND9.9 trillion, respectively.

Experts said raising capital has always been the top priority of banks in recent years. Therefore, if the capital increase plans are successfully implemented, the charter capital of commercial banks will increase sharply in 2023. High charter capital will be a good buffer to help banks have more resources to cope with difficulties and expand business activities besides supporting the economy and firms.