M&As not a one-way ticket
M&As not a one-way ticket
Banks are mulling hiking chartered capital to boost capacity and avoid being taken-over.
Mergers and acquisitions (M&As) are forecast to hold on growth momentum in the coming period.
In late May Viet A Bank’s general shareholder meeting gave nod to the plan to raise its chartered capital to VND5,000 billion ($238 million), up 61 per cent against the previous year.
To foster inner strength and avoid M&As, NamA Bank also decided to hike chartered capital to VND3,700 billion ($176 million) from VND3,000 billion ($142 million).
Similarly, Saigon Bank’s chartered capital will be lifted up to VND3,500 billion ($166.6 million) in 2012 from approximately VND3,000 billion at present and that of Orient Commercial Bank (OCB) from VND3,234 billion ($154 million) to VND4,000 billion ($190.4 million) in the later part of 2012.
“The move is important to help the bank enhance financial capacity, enabling us up to par with requirements of State Bank’s banking system restructuring targets,” said OCB’s chairman Trinh Van Tuan.
Big banks are also looking to boost financial capacity through capital hikes.
For instance, DongA Bank just finalised its plan to hike capital from VND4,500 billion ($214 million) to VND5,000 billion ($238 million) and contemplated issuing shares worth VND1,000 billion ($47.6 million) to existing shareholders to get its chartered capital to VND6,000 billion ($285 million) in 2012’s fourth quarter.
Financial expert Le Xuan Nghia said hiking capital was a viable solution to help small banks get into better financial health.
“However, it is not easy for small banks to raise chartered capital at the time M&As are increasingly in vogue,” said Nghia.
Ho Chi Minh City’s HDBank is awaiting the State Securities Commission’s go-ahead for its short-term certificates for a deposit issuance plan to hike chartered capital to VND5,400 billion ($257 million) from current VND3,000 billion ($142 million).
The bank is reportedly sourcing suitable partners to climb onboard banking sector’s M&A bandwagon as ‘it would be better for HDBank to expand scale and financial capacity if we found a suitable M&A partner instead of step by step hiking chartered capital,’ a bank top executive was quoted as saying.
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