There are many reasons for banks to increase chartered capital. They have to meet the State Bank’s requirement on having VND1tril ($62.5mil) worth of chartered capital as of early 2008. Some banks want to increase capital so as to have more capital when selling shares to strategic partners. Moreover, they want more capital to expand their operation scale.

An Binh bank is leading the share issuance move. It plans to issue VND1,800bil worth of shares. Other banks have the share values of between VND200bil and VND1tril. With the selling price of shares at 3-6 times higher than the face value, banks expect to collect VND1-3tril worth of capital.

The director of a bank said that its share issuance to increase chartered capital was decided by the shareholders’ meeting at the beginning of the year, and now is the time to fulfill the plans.

The director said that higher chartered capital allows banks to expand network, which can bring opportunities to access more clients, especially big ones. The banks with small scale seem to never have the opportunity to shake hands with big clients, since under the current regulations, banks cannot lend one client a sum of money bigger than 15% of their capital.

Big pressure on market

In the last week, some ten banks have gotten permission from the State Securities Commission to sell shares to the public worth VND4,500bil (face value).

If counting the banks that got permission before the total value of shares to be issued this year would reach VND7tril.

Some analysts say that banks are all trying to issue shares at this moment because they want to avoid ‘involvement in misfortune’ from the upcoming Vietcombank IPO.

There is no clear information about Vietcombank’s IPO, but Vietcombank’s share prices will surely affect bank share prices, negative or positive, the analysts said.

It is expected that banks will successfully attract a huge volume of capital worth several tens of billions VND, which would put heavy pressure on the market.

Bank shares wanted by everyone

Considered the ‘king of shares’, bank shares are still attractive in the eyes of investors, though they have fallen by 50% from their peak.

‘The wide-scale share issuance at this moment will make it hard for investors to arrange enough money for investments,” said Nguyen Duc Phong, an investor, who holds shares of three banks, worth more than VND800mil.

According to Mr Phong, investors all have at least one bank share item in their investment portfolio as injecting money in bank shares is considered the safest investment channel. Investors try to purchase bank shares even if they are short of money.

However, analysts believe that the profuse supply of bank shares will have impacts on the prices of listed securities.

Source: Tien phong.