Accordingly, the bank's charter capital is expected to increase by VND23,311 billion ($1.02 billion) through three sources including Techcombank’s retained earnings in last three year (VND5,827 billion or $255 million), additional reserve fund of charter capital (VND3,496 billion or $153 million), capital surplus as a result of private placement before the bank was listed (VND13,986 billion or $614 million).
Techcombank’s shareholders will be paid the 200-per cent stock dividends, equivalent to 2.331 billion of ordinary shares scheduled to be additionally issued. This charter capital increase will be made through the payment of 200-per cent stock dividends and shareholders do not contribute additional capital to the bank.
As such, Techombank’s total number of shares after its charter capital increase is estimated at 3.5 billion of shares.
As planned, the bank’s charter capital increase procedure will be completed in July. The share issuance is expected to take place in the third quarter of 2018. The new charter capital will help Techcombank surpass BIDV to become the third largest bank after Vietcombank and Vietinbank.
Recently, many commercial joint stock banks have planned to increase their charter capital after the bustling period of credit growth in order to improve the capital adequacy ratio (CAR) and when the adoption of CAR calculation based on norms of Basel II are approaching.
The report of the National Financial Supervision Commission shows that if CAR calculation based on Basel II is applied in the pilot banking group, the CAR will decrease sharply compared to the current report, mainly due to the increase in risk-weighted assets. This will greatly affect the credit growth of the banking system.
Previously, some banks announced their charter capital increases such as VPBank (increased by VND10 trillion or $439 million) and MB (increased by VND3,449 billion or $151 million).
However, a challenge the banks are facing is that even though their charter capital is pretty highly raised, the new cash flow to inject for charter capital increase does not really flow into the bank.
In the case of Techcombank, the sources to increase the bank’s chartered capital come from its retained earnings, additional reserve funds and stock surpluses from previous share issues.
All of these sources are included in the bank's equity. Therefore, although Techcombank’s charter capital is highly raised, the total of the bank’s equity does not change much. So do VPBank and MB.
The focus of raising capital is to have new cash flow from investors, thereby improving the bank's equity. However, all of the banks do not easily achieve this goal.
The State-owned commercial banks as Vietcombank and BIDV have plans to raise their capital by issuing new shares to foreign investors or seeking strategic partners. However, no bank has successfully raised its capital yet.
Prior to listing, Techcombank conducted private placement which obtained $900 million from major financial investment funds. This is the largest capital mobilization ever in Vietnam’s banking industry.
At the end of last year, foreign investors also spent $300 million to purchase more than 21 per cent of HDBank's stake before it was listed. However, this transaction took place on the secondary market and HDBank then offered private placements to its existing shareholders at the same price.