VIB issues bonds to raise capital ahead of Basel II

By Viet Phong, Phan Anh   July 15, 2018 | 11:23 pm PT
VIB issues bonds to raise capital ahead of Basel II
People walk past an office of VIB in Vietnam. Photo by VnExpress
Vietnam International Bank plans to mobilize VND4.5 trillion ($200 million) in Tier 2 capital in 2018 by issuing inconvertible bonds.

This was announced by the creditor in a document sent to shareholders for a vote last week.

The document says the issuance is aimed to help the bank (VIB) attain the capital adequacy ratio (CAR) required under Basel II regulations from January 1, 2019.

As of April 30 this year, the bank’s CAR was 12.25 percent, down against 13.07 percent last year.

VIB stated that it expected the issuance would help increase the return on equity rate for the bank and its shareholders.

The inconvertible bonds must have no warrants attached and are not guaranteed by assets, VIB said in the document, noting that the bonds will be issued to the domestic market via both private and public offerings, and to overseas market only through public offerings.

The bonds can be listed on domestic and overseas bourses. The maturity ranges from five to 10 years. 

Voting for the capital plan runs until July 24.

VIB has 1,495 shareholders. Commonwealth Bank of Australia – the only foreign strategic shareholder – now holds a 20-percent stake. Last year, VIB listed 564 million shares on the listed Public Company Market (UpCom).

The creditor reaped VND1.12 trillion ($48.33 million) in after-tax profit in 2017, doubling the figure achieved in 2016. The bank’s non-performing loan ratio dropped from 2.58 percent in 2016 to 2.49 percent in 2017.

VIB’s earnings per share (EPS) touched VND2,002 ($0.086) in 2017, a five-year high and close to a 78-percent hike on-year.

VIB is one of the 10 commercial banks selected by the State Bank of Vietnam to pilot the application of Basel II standards. Vietnam, under an action plan issued last year, set the target of having 12-15 commercial banks meet Basel II standards by 2020.

Basel II is a set of international banking regulations put forth by the Basel Committee on Bank Supervision, which leveled the international regulatory playing field with uniform rules and guidelines. 

Basel II provides guidelines for the calculation of minimum regulatory capital ratios and confirms the definition of regulatory capital and an 8-percent minimum coefficient for regulatory capital over risk-weighted assets.

Basel II divides the eligible regulatory capital of a bank into three tiers. The higher the tier, the less subordinated securities a bank is allowed to include in it. Each tier must hold a certain minimum percentage of total regulatory capital and is used as a numerator in the calculation of regulatory capital ratios.

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