Owner’s equity of credit institutions has increased sharply, but the registered capital of the whole system dropped VND3,350 billion. According to the State Bank of Vietnam (SBV), the decline was attributed to bank restructuring. Nevertheless, operations of credit institutions are now quite safe with liquidity guaranteed.
The Banker Magazine said bank restructuring brought 11 Vietnamese banks to the shortlist of 1,000 largest banks in the world. Vietnamese lenders are also ranked first in Southeast Asia by first-tier capital adequacy ratio.
Increased capital adequacy ratio
According to the SBV, assets of the banking system reached VND6,660 trillion as of July 31, 2015, an increase of nearly VND52 trillion over the previous month and up VND150,970 billion (or 2.32 per cent) from the end of 2014.
The sharp rise was attributed to the asset increase of joint stock commercial banks by VND37,719 billion to VND2,713,228 billion.
Not only total assets, owner’s equity also surged. By the end of July, the equity capital of the entire banking system reached VND546,949 billion, an increase of VND50,376 billion (or up 10.28 per cent) from the end of 2014.
Mr Nguyen Tri Hieu, a financial expert, said the registered capital of State-owned commercial banks was augmented sharply. The merger of several State-owned commercial banks with formerly State-owned lenders (e.g. MHB was admitted to BIDV) boosted the charter capital of State-owned commercial banks by 3.63 per cent. Meanwhile, the investment capital of joint stock commercial banks looked up just 2.43 per cent.
Presently, the investment capital of State-owned commercial banks fell by VND4,477 billion to VND144,976 billion. However, the value still climbed 2.21 per cent or VND9,649 billion over the end of 2014.
Joint stock commercial banks reported a sharp decline in profitability as they had to set aside for bad debt provisioning and faced stiff competition from State-owned lenders.
Operations of credit institutions are stable and liquidity is guaranteed. Accordingly, minimum capital adequacy was 13.51 per cent, much higher than the allowed rate of 9 per cent set by the SBV.
According to experts, despite slow economic growth, the banking system has stepped up reshuffle and achieved remarkable results in growth, scale, credit growth, deposit, safety ratio and financial soundness.
SBV Governor Nguyen Van Binh said purchase, merger or consolidation of credit institutions not only happen to weak entities, but also to healthy entities or between domestic credit institutions and foreign ones. This motivation has pushed up assets and owner’s equity of credit institutions, he added.
To set up regional banks
Governor Binh said the central bank will continue to consider and implement some consolidation and merger cases with the participation of State-owned commercial banks to set up one or two banks of regional scale and level by the end of 2015. Vietnam also needs a bank featuring national identities. Dr Can Van Luc, Senior Advisor to Board of Directors, BIDV, said a big bank that is to go regional will perform tasks like improving competitiveness to be a market-leading institution in international integration. Hence, it needs to be prepared for a new scale in personnel and technology. From the experience of other nations, after the banking restructuring process, each country needs only 2-5 backbone banks of international scale. Meanwhile, Vietnam has so many banks, but lacks those of regional scale and class. Vietnam only needs five backbone banks of the nation in addition to some smaller ones serving niche markets.
For the time being, Vietinbank, Vietcombank and BIDV may be the “candidates” for regional banks as they have the biggest scale in the system and have rapid growth in equity, total assets and business networks after merged with weak banks. Vietinbank and Vietcombank have made every effort to be regional banks.
However, the banking system is still confronting difficulties and challenges, although it achieved many positive results in banking system restructuring and bad debt settlement scheme. Mr Vu Dinh Anh, a banking and financial expert, said the Government should direct relevant ministries and agencies to coordinate with the SBV to carry out consistent policies and measures to restructure the credit system, and apply zero tax on bad debt/asset trading of credit institutions. Credit institutions need to be exempted or reduced from corporate income tax after they merge with other ones.
In addition, the SBV needs effective measures to support credit institutions to accelerate the progress and effect of settling security assets according to terms and conditions in credit contracts, and speed up the settlement of bad debts in the system. It is not easy to have banks of regional class with relevant asset and network scales, let alone good service quality.
T.D
Vietnamese
