VietNam Business: capital

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Friday, February 18, 2011

Province lures investors

Zinc-plated corrugated steel is rolled at the Hoa Sen Group factory in the southern province of Ba Ria – Vung Tau. — VNA/VNS Photo The Anh

HCM CITY — Southern coastal Ba Ria – Vung Tau Province has attracted an increasing number of investment projects over the last five years, according to the province's Department of Planning and Investment.

From 2006 through 2010, the province issued 196 new investment licences with total committed capital of US$24.26 billion.

The investment projects now number at 280, with total committed capital of $27 billion.

Most investment projects are in the tourism and industry sectors.

The number of projects has doubled, while committed capital has increased 10 times compared to the target set for the 2006-10 period, according to the department.

Implemented capital reached $3.39 billion, a rise of 1.5 times compared to the 2001 – 05 period, about $650 million higher than the target.

According to the department, foreign investment projects, mostly in the tourism sector, have accounted for 60 per cent of total investment capital and 50 per cent of export turnover.

During the 2006-10 period, foreign-invested projects made up 20 – 30 per cent of the total budget and created more than 20,000 jobs.

Local investors have focused on projects to develop seaports, residential areas and other infrastructure projects.

They include projects to develop Long Son Oil and Gas Industrial Park ($169.7 million), An Phu shipbuilding factory ($144.1 million), Chau Duc residential area ($63.43 million) and Nui Lon – Nui Nho tourist resort ($71.79 million).

Tan Thanh District in the province has attracted 127 projects with total investment capital of VND86,357 billion ($4.4 million).

Vung Tau City ranked second in the number of projects, with 76, and a total investment capital of VND24,099 billion ($1.2 million).

Viet Nam's membership in the World Trade Organisation (WTO) in 2007 has helped spur foreign investment growth, especially in Ba Ria – Vung Tau Province.

In 2007, the province attracted investment capital of only $1.4 billion, but capital rose to $11.6 billion in 2008.

Le Kim Huong, director of the province's Department of Planning and Investment, said the province wanted to create the most favourable conditions for both local and foreign businesses to invest.

The executive director of Ho Tram Beach Resort, Le Ngoc Quynh, noted that when his company invested in tourism in Phuoc Thuan Commune in Xuyen Moc District, local authorities supported them by improving infrastructure, such as power and telephone lines.

Because of the global recession, investors have also faced challenges in luring capital, particularly for large projects.

In addition, frequent changes in Government policies about land-use have postponed site clearance work because of lawsuits on compensation for displaced residents. This, in turn, has delayed progress on large projects.

Located in the major southern economic zone more than 100 kilometres from HCM City to the southeast, Ba Ria – Vung Tau Province is a major tourism site, favoured by nature with a long, beautiful coast.

The coastal province is also the country's only site for the offshore oil and gas industry. — VNS

Thursday, February 10, 2011

Credit-Thirsty SMEs Seeking Ways To Survive

Customers seek consulting for their borrowing at Prudential Finance in HCM City

Small- and medium-sized enterprises (SMEs) are regarded as the backbone of the economy, accounting for 97% of the 470,000 registered businesses. Over the years, they have played an increasingly significant role in the economy, contributing to the GDP and generating employment.

Vietnam’s SMEs are presently very much in need of capital to expand their operations and profits. However, they are facing tremendous difficulties in gaining sufficient access to finance, the most important obstacle to their growth.

Vu Cong Hoa, head of Phuong Nam Packaging and Mechanical Engineering Cooperative in HCM City, is struggling to find funds to continue the project that is two-thirds complete. His business, which is conducting a study on creating a waste processing line to turn garbage into organic fertilizers, has not generated any revenue since the beginning of the year. Up to now, 70% of the work done has resulted in various types of machinery lying in heaps in the cooperative’s warehouse.

Unable to raise sufficient capital from cooperative members as well as failing to obtain bank loans, Hoa has resorted to every credit fund but to no avail. He has yet to know how to overcome the capital shortage in the future.
Hoa’s dilemma is typical for many local SMEs which are thirsty for investment capital and have no idea how to quench their thirst. Inadequate access to finance remains a great concern for SMEs despite numerous Government moves and banks’ efforts. On the one hand, SMEs can articulately present to banks all their difficulties in terms of capital, technology renovation, facility construction and investment. On the other hand, banks frequently face problems in evaluating loan applications from enterprises.

Indeed, experts have pointed out two major issues among others that are borrowers’ financial statement and collateral. Financial reports of businesses are deemed to be unreliable and lack transparency. Some businesses may maintain two to three different accounting records on their operation: A financial report which often declares loss aiming at evading tax; another for internal use that would not be revealed to outsiders; and maybe a third one for shareholders’ review.

Applications for bank loans with a financial statement declaring loss would surely be rejected. Banks would set aside money for credit-worthy SMEs, those with accurate reports, feasible business plans and high possibility for solvency.

Even when banks neglect the misleading financial statement and switch to scrutinizing project feasibility, many businesses still cannot meet this requirement. In many cases, enterprises try to seek short-term loans to finance long-term assets like machinery, equipment and facility construction. Besides, collateral and financial capacity are other hurdles that block businesses from access to bank loans.

Where to turn to for funding

Experts said SMEs can seek loans from credit sources offering long-term loans, finance sources formed under joint ventures, finance leasing companies and credit funds. They can also approach foreign financial institutions that promote projects related to climate change or clean production with minimal impact on the environment. To ensure success, applicants should fully understand the institution’s evaluating criteria. Generally, lenders want a coherent financial statement that has been audited and a profitable business plan.

The first capital source for enterprises came from Government policy. According to Tran Buu Long, vice director of the HCM City Credit Fund, credit policy for SMEs has been implemented through various municipal programs. The large scale program provides the investment stimulus package while smaller programs cover a series of funds for various purposes. There are a fund that revolves the money to facilitate cleaner and greener production for businesses, fund to mitigate environmental pollution, fund to support science and technology development, and fund to assist businesses in building warehouses and transportation infrastructure.

The city’s Science and Technology Development Fund has an initial capital of VND50 billion with non-mortgage interest rate ranging from 0%. Its maximum level is half of that of commercial banks. The fund can provide non-refundable loans for certain projects. Its capital is expected to reach VND200-300 billion by year-end.

The HCM City Finance Investment Company that holds many capital sources of the city is also a potential lender for businesses.

The city’s Credit Guarantee Fund has provided guarantees for businesses to borrow a total of VND400 billion up to now. However, banks have turned down many applicants who have been guaranteed by the fund. Currently, the fund’s balance of about VND277 billion is too modest for the demand of over 200,000 businesses in the city.
Commercial banks are probably best positioned to improve SMEs’ access to finance. Many banks are carrying out promotion programs targeting SMEs considered to be their potential customers. ACB has some projects to aid SMEs; some in collaboration with the Japan Bank for International Cooperation while others linking with projects in the European Union.

Another example is the partnership between the International Finance Corporation and Techcombank in a program worth US$125 million that focuses on supporting local SMEs in renovating technological equipment and saving energy.

SMEs’ journey to seek capital seems to be full of hardships. Yet amid those difficulties, the authority of Long Hau Industrial Park in Can Giuoc District, Long An Province has managed to find a practical solution. Well aware of businesses’ financial woes, the authority of Long Hau has borrowed capital and lent it to businesses operating in their park.

Long Hau Industrial Park has built facilities and workshops for lease or sale to businesses and allow them to pay by monthly installments over a duration as long as 10 years. The park also helps businesses obtain long-term bank loans in cash. Besides, it works on creating funding channels for businesses by collaborating with financial institutions and banks. Long Hau’s efforts have eased businesses’ financial pressure and lured more customers into the park.

Saturday, January 8, 2011

Foreign firms look to raise city investment

Small- and medium-sized foreign firms in HCM City are looking to
increase their capital because they see potential for expansion and
growth.

The Dau Tu (Vietnam Investment Review) newspaper quotes the HCM City
Department of Planning and Investment as saying 65 FDI projects
operating in the City have raised their investment capital to 168.9
million USD in the first nine months of this year.

These projects are mainly in the manufacturing, industrial, service and retail sectors.

Fastfood chain Lotteria Vietnam Ltd Co has decided to invest an
additional 7 million USD to expand its chain, while sporting goods
manufacturer Adidas Vietnam has decided to raise its investment by a
million dollars to 3.9 million USD.

Retailer Giant
South Asia has poured an additional 15 million USD into its distribution
network and warehouses, raising its total investment capital to 20
million USD.

Lu Thanh Phong, DPI deputy director,
said FDI businesses in the city had, compared to previous years,
increased investments in manufacturing, processing and industrial
production over the last two years.

Nguyen Tan
Phuoc, deputy head of HCM City Export Processing and Industrial Park
Authority, said the capital increase showed trust in the market's
development potential and stability.

Yuki Vietnam
Ltd, a company that produces industrial sewing machinery, has invested
an additional 5 million USD this year, bringing its total investment
capital to 20 million USD. This is the third time it has increased its
capital investment in the city.

Tsunoda Shinji,
general director of the company, said the increase in capital aimed to
expand its domestic market share, instead of focusing on exports.
Currently, the company earns 16 million USD per year from the domestic
market, and it aims to increase this to 24-26 million USD a year in the
near future.

A representative of Australia 's RMIT
University said it had invested more than 15.1 million USD to build a
dormitory for its students in Vietnam .

Merilyn
Liddell, director of RMIT Vietnam, said the investment aimed to expand
the school area by 2013 to meet rising demand for international standard
education in Vietnam .

However, many FDI
businesses had also complained that they were hampered by the lack of
skilled workers, and were having to provide the needed training by
themselves, the newspaper reported./.

Friday, January 7, 2011

Foreign firms look to raise City investment

HCM CITY — Small- and medium-sized foreign firms in HCM City are looking to increase their capital because they see potential for expansion and growth.

The Dau Tu (Viet Nam Investment Review) newspaper quotes the HCM City Department of Planning and Investment as saying 65 FDI projects operating in the City have raised their investment capital to US$168.9 million in the first nine months of this year.

These projects are mainly in the manufacturing, industrial, service and retail sectors.

Fastfood chain Lotteria Viet Nam Ltd Co has decided to invest an additional $7 million to expand its chain, while sporting goods manufacturer Adidas Viet Nam has decided to raise its investment by a million dollars to $3.9 million.

Retailer Giant South Asia has poured an additional $15 million into its distribution network and warehouses, raising its total investment capital to $20 million.

Lu Thanh Phong, DPI deputy director, said FDI businesses in the city had, compared to previous years, increased investments in manufacturing, processing and industrial production over the last two years.

Nguyen Tan Phuoc, deputy head of HCM City Export Processing and Industrial Park Authority, said the capital increase showed trust in the market's development potential and stability.

Yuki Viet Nam Ltd, a company that produces industrial sewing machinery, has invested an additional $5 million this year, bringing its total investment capital to $20 million. This is the third time it has increased its capital investment in the city.

Tsunoda Shinji, general director of the company, said the increase in capital aimed to expand its domestic market share, instead of focusing on exports. Currently, the company earns $16 million per year from the domestic market, and it aims to increase this to $24-26 million a year in the near future.

A representative of Australia's RMIT University said it had invested more than $15.1 million to build a dormitory for its students in Viet Nam.

Merilyn Liddell, director of RMIT Viet Nam, said the investment aimed to expand the school area by 2013 to meet rising demand for international standard education in Viet Nam.

However, many FDI businesses had also complained that they were hampered by the lack of skilled workers, and were having to provide the needed training by themselves, the newspaper reported. — VNS

Monday, December 20, 2010

SCIC to sell capital in 90 State-owned enterprises

Photo: Reuters

The State Capital Investment Corporation (SCIC), the representative of state-owned capital at state-owned enterprises, expects by the end of this year to sell capital at 90 state-owned enterprises, the corporation said.

The 90 enterprises are small and medium-sized companies with capital of no more than several billions of Vietnamese dong each.

The plan to sell the state-owned capital for the remainder of the year, is expected to be carried out successfully as the global economy recovers. This year, the corporation has targeted to sell capital at 170 state-owned enterprises.

However, a representative from one of 15 securities companies that trade in stake divestment, said the SCIC should ensure more diversity and flexibility in selling capital, especially after the experiences gained in divestment in previous years.

At present, the SCIC sells state-owned capital under public auctions and securities companies act as consultants and trading agencies at the auctions.

To have effective auctions, the corporation has been urged to improve production and business at enterprises to ensure the quality of securities before they are sold at auction. The timing of auctions is also crucial.

In coming years, the selling of state-owned capital would be one of the major tasks of the corporation as state-owned capital at state-owned enterprises is reduced in industries that do not need a great deal of State control.

The State plans to focus capital spending on key economic industries, said SCIC deputy director Hoang Nguyen Hoc.

The corporation's target is to hold state-owned capital at only 100 state-owned enterprises by 2012.

So far this year, the corporation has sold capital at 81 state-owned enterprises.

Last year, the corporation sold state-owned capital at 238 enterprises, a record high against previous years. It gained the good result because the state created favourable conditions for the sales.

Wednesday, December 15, 2010

SCIC to sell capital in 90 State-owned enterprises

The State Capital Investment Corporation (SCIC), the representative of
state-owned capital at state-owned enterprises, expects by the end of
this year to sell capital at 90 state-owned enterprises, the corporation
said.

The 90 enterprises are small and medium-sized companies with capital of no more than several billions of Vietnamese dong each.

The plan to sell the state-owned capital for the remainder of the year,
is expected to be carried out successfully as the global economy
recovers. This year, the corporation has targeted to sell capital at 170
state-owned enterprises.

However, a representative from
one of 15 securities companies that trade in stake divestment, said the
SCIC should ensure more diversity and flexibility in selling capital,
especially after the experiences gained in divestment in previous years.

At present, the SCIC sells state-owned capital under
public auctions and securities companies act as consultants and trading
agencies at the auctions.

To have effective auctions, the
corporation has been urged to improve production and business at
enterprises to ensure the quality of securities before they are sold at
auction. The timing of auctions is also crucial.

In coming
years, the selling of state-owned capital would be one of the major
tasks of the corporation as state-owned capital at state-owned
enterprises is reduced in industries that do not need a great deal of
State control.

The State plans to focus capital spending on key economic industries, said SCIC deputy director Hoang Nguyen Hoc.

The corporation's target is to hold state-owned capital at only 100 state-owned enterprises by 2012.

So far this year, the corporation has sold capital at 81 state-owned enterprises.

Last year, the corporation sold state-owned capital at 238 enterprises,
a record high against previous years. It gained the good result because
the state created favourable conditions for the sales./.

Friday, November 26, 2010

New rules on foreign investment in companies

Lawyers of Bizconsult Law Firm

A year after Decree No 88/ 2009/QD-TTg was issued to govern capital contributions and share purchases by foreign investors in Vietnamese enterprises, the Ministry of Finance has finally issued its guiding regulations.

Circular No 131/2010/TT – BTC of September 6, 2010, repeats the list of foreign investors stipulated in Decree 88, which includes: (i) institutions incorporated and operating under foreign law and their branches in or outside of Viet Nam; (ii) enterprises in which a foreign entity holds of over 49 per cent of charter capital; (iii) investment funds with foreign capital of more than 49 per cent; and (iv) individuals who are not Vietnamese by citizenship.

The circular permits these foreign investors to invest or purchase shares or interests in all types of Vietnamese enterprises, including limited liability companies, unlisted joint stock companies, State-owned enterprises, and private enterprises. To do so, foreign investors must maintain bank accounts at licensed commercial banks in Viet Nam, and individual investors must pass a criminal background check.

Any change in the corporate form of the target which results from a capital contribution or share purchase must be registered in accordance with provisions in the Law on Enterprises and Government and Decree No 139/2007/ND-CP of September 2007.

Circular No 131, which takes effect on October 15, also includes specific guidelines for conducting capital contribution and share purchases. Under the circular, foreign investors may conduct transactions themselves or through qualified agents.

Residential real estate transactions regulated

The Ministry of Construction issued Circular No 16/2010/TT-BXD on September 1, providing detailed guidelines for the implementation of Government Decree No 71/2010/ND-CP of June 23, 2010, regarding residential real estate transactions.

Under Article 8 of Circular 16, developers can raise capital from banks, credit institutions, investment funds, corporate bonds, secondary investors and other organisations or individuals. However, each individual or household within a city or province may contribute capital in-kind only once to only a single residence.

Under Article 20 of the circular, enterprises licensed to conduct real estate transactions must meet conditions on business registration, legal capital, and publication of transactions on real estate exchanges, before entering into any transactions.

But the regulation gives individuals and organisations not licensed to conduct real estate transactions more favorable conditions. These investors are not required to meet business registration and legal capital conditions, and their transactions can be certified by the developer of a particular real estate project without any costs and fees.

The circular, which includes related model contracts, takes effect in 45 days from its promulgation.

Thursday, November 25, 2010

Small banks have trouble with recapitalization

An unidentified bank employee unstraps a stack of Vietnamese banknotes. Several small commercial banks find it hard to meet the chartered capital requirement of at least VND3 trillion by the year-end as their State-owned shareholders may not inject more capital into them as earlier planned - Photo: Le Toan

HCMC – Several small-scale commercial banks are now facing a huge test as how to increase their chartered capital to at least VND3 trillion by the end of this year since State-owned shareholders will unlikely pump more capital into these banks.

Many small banks have relied on State-owned shareholders, and they have built their recapitalization plans on pledges by these shareholders to inject more funds to maintain their stakes. However, a recent decision by the Government to restrict State-owned corporations from investing outside their core business operations and to withdraw their capital from non-core businesses has put many small banks under tenterhooks.

The State Bank of Vietnam has so far approved recapitalization plans by about 16 out of 21 banks with chartered capital less than the required VND3 trillion. However, many of these banks will have to redo their plans.

Nam Viet Commercial Bank (Navibank), for example, must be thinking laboriously now to seek new funds as Vietnam Textile and Garment Group (Vinatex) finds it difficult to contribute more capital as pledged. Vinatex, which holds an 11% stake in Navibank, has not earned the Government’s blessing to continue investing in the bank.

Vu Duc Giang, CEO of Vinatex, told the Daily on Monday that the Government had not permitted the company to contribute more funds into this bank. Furthermore, “in the future, if the Government asks Vinatex to withdraw capital from Navibank, the corporation must do it,” he said on the phone.

It is reported that Navibank has got approval from the central bank to increase capital from VND1 trillion to VND3.5 trillion. To realize the scheme, the bank will issue 98.9 million shares to existing shareholders in the first phase, then sell 148.35 million shares to existing shareholders in the second phase.

However, this capital raising plan will not work if the big shareholder Vinatex does not participate.

Another case is Vietcombank, which is 90% owned by the State. This bank has also invested in other banks such as Gia Dinh Bank and Orient Commercial Bank, and now is rethinking its strategy.

Nguyen Hoa Binh, chairman of Vietcombank, told the Daily that the bank would not invest more capital to maintain its ownership of 19% in Gia Dinh Bank when the bank issues shares to increase capital from VND1 trillion to VND3 trillion.

Binh said for the long term, the bank would not invest more or even divest capital from other commercial banks due to consideration of business efficiency.

It is unlikely that Vietcombank will pump more capital into financial investments as the Government has just injected more funds into the bank to increase its chartered capital by 33% in order that the bank meets the newly required capital adequacy ratio (CAR) of 9% as stated in Circular 13.

Ho Huu Hanh, director of the central bank’s HCMC Branch, said that almost all banks in the city had submitted their fund raising plans to the branch, but the success of those plans would not be ensured following the Government’s decision asking State-owned corporations to narrow down their outside investments.

If banks cannot realize their recapitalization plans by the end of this year, they must merger with each other or get disbanded in the future.

In its decision, the Government has dictated that State-owned corporations obtain approval from the Prime Minister before making decisions whether to continue pumping capital or not. The Prime Minister has assigned the Ministry of Finance to evaluate the effectiveness of State investments at commercial banks.

Japan bank lobby says new capital rules "harsh"

TOKYO - The new Basel III bank regulations requiring higher capital levels are "harsh", although Japan's banks have no need now to strengthen their capital further, said Masayuki Oku, chairman of the Japanese Bankers Association.

Global regulators, aiming to prevent any repeat of the international credit crisis, earlier this month agreed to force banks to more than triple to 7 percent the amount of top quality capital they must hold to withstand future shocks.

"That's very harsh for Japanese banks," Oku, who is also president of the core commercial unit of Sumitomo Mitsui Financial Group, told a regular news conference on Tuesday.

Still, Japan's three biggest banks -- Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui -- have already boosted their capital levels through a round of capital-raising in anticipation of the tougher new rules.

"We don't expect any capital-raising plans from individual banks in the near future," Oku said.

"Banks will try to expand their business and limit capital raising which could cause share dilution. That is going to be a trend in the industry," he said.

Oku also said that Japan's intervention in currency markets last week to curb a rise in the yen was effective but that the government had waited too long to take action.

"If intervention is done too late it takes a lot of energy and money to adjust the currency level, and I think there could have been better timing for the intervention," he said.

The yen surged to a 15-year high against the dollar last week of 82.87 yen -- much stronger than many Japanese firms' forecasts for around 90 yen -- threatening the outlook for Japan's export-reliant economy.

Sunday, November 21, 2010

Delta SMEs urged to use idle capital

HCM CITY — Small – and medium-sized enterprises in the Cuu Long (Mekong) Delta provinces that have had difficulty accessing bank loans should make use of their idle capital, business leaders have recommended.

"The situation for recovery after the financial crisis is not easy for every SME," Nguyen Huu De, deputy director of Can Tho City's Viet Nam Chamber of Commerce and Industry (VCCI) told the conference last Friday.

De said SMEs accounted for 90 per cent of total businesses in the Delta region.

Other experts at the conference also encouraged SMEs in the region to use idle capital to re-invest in production.

Bui Van, consultant for the financial channel FBNC, said most SMEs were unaware of how to use all capital sources for production because they had not been doing business for a long time.

Dr Le Tham Duong of the HCM City Banking University proposed that banks in the region create more credit forms rather than just guaranteed loans.

"In my research, only one-third of SMEs can access capital from bank loans, and the remaining two-thirds have to find other sources, even with higher interest rates," he said.

Duong said SMEs could gain more trust from banks by improving their production and management capacity.

They should also demonstrate their need for owning advanced technology and equipment, he added.

However, Vo Hung Dung, director of the VCCI branch in Can Tho Province, told Viet Nam News that SMEs should not be blamed for difficulties in accessing capital from loans because the amount of available capital loaned by banks was taken up mostly by large companies.

The conference was co-held by the laisuat.vn economic information channel and Can Tho VCCI chapter. — VNS

Saturday, November 6, 2010

Asia banks set to boost lending as Basel hurdle cleared

HONG KONG/SINGAPORE - Asian lenders are set to use surplus capital to accelerate lending in the region's fast-growing economies or scout for acquisitions after new capital rules confirmed most will comfortably meet the global regulatory requirements.

The new Basel III rules announced late on Sunday will require banks to raise the level of top-quality capital they hold to 7 percent of their risk-bearing assets over the course of the next nine years. The majority of Asian banks comfortably meet that requirement already.

This means the region's banks are sitting on an estimated surplus capital of about $400 billion, according to analysts at brokerage CLSA, which will come in handy to cope with the strong loan growth expected in the region.

"Given that growth rates in Asia are so high, they may use the excess capital to finance growth and maybe we don't see much in the way of new capital raisings in the next 3-5 years," CLSA analyst Daniel Tabbush said.

Barring Japan, where demand for loans is forecast to drop 6.5 percent in 2010, most Asian countries are likely to see loan growth of between 5.7 percent to 18.3 percent over the course of 2010, according to research by Macquarie.

"The trick here is to find the well capitalized banks and match them with markets ripe for a further expansion in lending," said Ismael Pili, head of Asian financial research at Macquarie.

Pili sees banks in Indonesia - where the average common equity ratio is estimated at around 16.5 percent - having the best promise to deliver on growth, with PT Bank Panin and PT Bank Danamon having the most potential for balance-sheet expansion.

M&A possible

Banks could also look at M&A opportunities to deploy excess capital. Deal activity is seen higher in countries where credit growth is relatively slower or where banks have higher surplus capital.

"M&A is still a possibility, specially by the Chinese banks as they are the ones sitting with the biggest pool of excess capital," CLSA's Tabbush said.

CLSA estimates Chinese banks having about $153 billion in surplus capital.

Australia and New Zealand Banking Group Ltd, which wants to rapidly grow in Asia, is exploring the option to buy a majority stake in Korea Exchange Bank, which is currently valued at about $4 billion.

Still, expectations about large M&As are low due to lack of assets and regulatory restrictions.

"The problem with acquisitions in Asia is the lack of availability of assets," said Sunil Garg, a banking analyst with J.P. Morgan.

"Then there are lots of regulatory hurdles. When you get regulatory roadblocks, then it basically reduces opportunities. Hostile M&A is just not popular in Asia. So you can't do cross-border deals and you can't go hostile," he added.

Many Asian banks were holding on to excess capital due to the uncertainty over the Basel III rules. But holding on to excess capital over a longer period is set to dilute banks' return on equity, meaning some will look to raise dividends.

Tuesday, October 26, 2010

SBV to review capital rules

The State Bank of Viet Nam in Ha Noi. — VNS Photo

HA NOI — The State Bank of Viet Nam will review new strict capital adequacy requirements imposed on commercial banks by Circular No 13, following an outcry from the banking sector and a directive from the Government.

The announcement late Wednesday helped boost shares on the nation's stock market yesterday.

The review and analysis of Circular No 13 would aim to address shortcomings in various risk management provisons, including the imposition of stricter capital adequacy ratios, the State Bank said.

A deadline for conclusion of the review was not disclosed. However, last month, Prime Minister Nguyen Tan Dung ordered the State Bank to review the circular and report its findings and possible solutions before the new regulations were scheduled to take effect on October 1.

Circular No 13 would require commercial banks to increase their capital adequacy ratios from 8 to 9 per cent, as well as impose other risk management measures.

For instance, the circular would restrict banks from lending out funds from non-term deposits made by the State or State entities, the social insurance fund or commercial lending organisations.

According to media reports, many commercial banks and the Viet Nam Banking Association complained that this last provision would require commercial banks to leave idle as much as 35 per cent of deposited funds. They urged the central bank to extend the deadline for complying with the circular in order to give banks more time to restructure investment portfolios.

Fiachra Mac Cana, managing director of the research department of HCM Securities Co, predicted that the review would not result in any significant changes to the requirements but would allow banks more time to comply and adjust loan and capital ratios.

A central bank official who asked to remain unnamed told Viet Nam News yesterday that Circular No 13 was indeed the opening salvo of what would be an ongoing programme of stricter risk management measures to be imposed on the nation's banking system.

Many economists, the official noted, have complained that the capital adequacy ratios in Circular No 13 were still too low to adequately guard against risk. The newly passed Law on Credit Institutions to take effect in January includes provisions stricter than those in Circular No 13, he noted, but still short of the Basel standards for finance and banking. — VNS

Tuesday, October 19, 2010

Vietcombank receives official approval to increase capital

The partly-privatized Vietcombank on Tuesday received government approval to raise their charter capital by 33 percent to VND17.59 trillion (US$902 million).

The move aims to help increase the bank's capital adequacy ratio (CAR).

"The charter capital increase is very positive," said Vietcombank management board member Le Thi Hoa in a phone interview with Vietnam News.

Vietcombank, coded VCB on Ho Chi Minh Stock Exchange, is in the process of finalizing its financial prospectus to submit to the State Securities Commission next week with the hope of receiving approval by the end of this month.

Under the proposal, Vietcombank will issue additional shares to all existing shareholders in accordance with the ratio of 100:33 at the face value of VND10,000 per share.

"We hope that right after the increase, our CAR will increase to 9-10 percent from 8.45 percent and we will have more capital to do business," Hoa said.

Under the Circular No13 issued by the State Bank of Vietnam, commercial banks must have a CAR of at least 9 percent by the end of this month, which is said to challenge several banks.

In the past two months, Vietcombank cut stakes at Vietnam Eximbank and Gia Dinh Bank to 6.93 percent and 11 per cent to restructure their investment portfolios in an effort to raise their CAR by the end of the month.

Early last month, Vietcombank increased its charter capital to VND13.22 trillion ($678.15 million).

Fitch Ratings recently lowered Vietcombank's individual rating from D to D/E, removed the rating from Rating Watch Negative, and affirmed Vietcombank's Support Rating at 4.

Fitch said the downgrade reflected Vietcom-bank's substantially weakened balance sheet that arose from excessively strong loan growth and the fragile quality of loans.

Vietcombank's credit profile was said to be comparable to D/E-rated State-owned banks, even though the bank's loan to deposit ratio was among the lowest.

"That's just their business and their ratings are not always true," said a representative from the bank who asked to be unnamed.

A foreign credit rating service provider like Fitch does not have a full understanding of Vietnamese banks and their standards may fit more with foreign banks, the official said.

"Look at the market response to that news. Nothing happens and VCB shares are in good liquidity, it is just up and down as usual," said the official.

On Tuesday, VCB share closed down 1.6 percent with individual shares priced at VND37,400 VND each ($1.91).

The Hanoi-based bank, which remains more than 90.7 percent State-owned, posted a first-half profit of VND2.8 trillion ($145.8 million), up 7.3 percent against the same six months last year. Net income from non-credit services was up 15 percent to a total of VND475 billion ($24.7 million).

Vietcombank has increased its risk provision to 39.6 percent against the first half of last year to VND350 billion ($18.2 million) and as of June 30 has total assets worth VND246.3 trillion ($12.8 billion).

Vietcombank receives official approval to increase capital

The partly-privatised Vietcombank on Sept. 7 received Government
approval to raise their charter capital by 33 percent to 17.59 trillion
VND (902 million USD).

The move aims to help increase the bank's capital adequacy ratio (CAR).

"The charter capital increase is very very positive," said Vietcombank
management board member Le Thi Hoa in a phone interview with Vietnam
News.

Vietcombank, coded VCB on HCM Stock Exchange, is in
the process of finalising its financial prospectus to submit to the
State Securities Commission next week with the hope of receiving
approval by the end of this month.

Under the proposal,
Vietcombank will issue additional shares to all existing shareholders in
accordance with the ratio of 100:33 at the face value of 10,000
VND per share.

"We hope that right after the increase, our
CAR will increase to 9-10 percent from 8.45 percent and we will have
more capital to do business," Hoa said.

Under the Circular
No13 issued by the State Bank of Vietnam , commercial banks must
have a CAR of at least 9 percent by the end of this month, which is said
to challenge several banks.

In the past two months,
Vietcombank cut stakes at Vietnam Eximbank and Gia Dinh Bank to 6.93
percent and 11 per cent to restructure their investment portfolios in an
effort to raise their CAR by the end of the month.

Early last month, Vietcombank increased its charter capital to 13.22 trillion VND (678.15 million USD).

Fitch Ratings recently lowered Vietcombank's individual rating from D
to D/E, removed the rating from Rating Watch Negative, and affirmed
Vietcombank's Support Rating at 4.

Fitch said the
downgrade reflected Vietcom-bank's substantially weakened balance sheet
that arose from excessively strong loan growth and the fragile quality
of loans. Vietcombank's credit profile was said to be comparable to
D/E-rated State-owned banks, even though the bank's loan to deposit
ratio was among the lowest.

"That's just their business
and their ratings are not always true," said a representative from the
bank who asked to be unnamed.

A foreign credit rating
service provider like Fitch does not have a full understanding of
Vietnamese banks and their standards may fit more with foreign banks,
the official said.

"Look at the market response to that
news. Nothing happens and VCB shares are in good liquidity, it is just
up and down as usual," said the official.

On Sept.7, VCB share closed down 1.6 percent with individual shares priced at 37,400 VND each (1.91 USD).

The Hanoi-based bank, which remains more than 90.7 percent State-owned,
posted a first-half profit of 2.8 trillion VND (145.8 million USD), up
7.3 percent against the same six months last year. Net income from
non-credit services was up 15 percent to a total of 475 billion VND
(24.7 million USD).

Vietcombank has increased its risk
provision to 39.6 percent against the first half of last year to 350
billion VND (18.2 million USD) and as of June 30 has total assets worth
246.3 trillion VND (12.8 billion USD)./.

Monday, October 18, 2010

ECB's Weber hopeful of Basel III deal at weekend

Photo: Reuters

FRANKFURT - Negotiations on the way banks around the world gird themselves for shocks can be wrapped up at the weekend, European Central Bank Governing Council member and Bundesbank head Axel Weber said on Wednesday.

Bankers and investors are eagerly awaiting details of the new rules which will determine how much of a capital cushion banks will have to set aside as a safety net.

"Hopefully we will bring the negotiations to a conclusion at the weekend in Basel," Weber said at the first day of the annual Banks in Transition conference that will attract top executives from the financial world.

Central bank and regulatory officials agreed a proposal for tougher new global bank capital rules on Tuesday but kept the details confidential until Sunday.

The recommendations by the so-called Basel Committee go to the Group of Governors and Heads of Supervision (GHOS), chaired by European Central Bank President Jean-Claude Trichet, which meets in the Swiss city on Sunday.

The recommendations govern how much extra capital banks will have to hold in future to avoid governments having to bail out the sector in the next crisis.

They also cover arrangements for phasing in higher standards on the quality of capital banks must hold in future.

Weber, seen as one of the ECB's heavyweight policymakers, also delivered a cautious message on the euro zone economy, but rebuffed the idea of the bloc falling back into recession.

"I do not share fears of a double recession or deflation," he said.

He warned, however, that it was too early to declare the financial crisis over, saying markets remained characterized by uncertainty and that setbacks could not be ruled out.

He backed German government plans for dealing with insolvent banks and urged regulation to be globally applicable.

Saturday, October 16, 2010

Vietnam orders status report on large FDI projects

Vietnam orders status report on large FDI projects The Ministry of Planning and Investment has ordered foreign investors of projects with capital of more than US$1 billion to submit a progress report by next Thursday.

The status of real estate projects that cover more than 50 hectares of land as well as mining projects will also need to be reported, the ministry’s Foreign Investment Agency said.

The reports are expected to cover important issues concerning financing, labor and environmental impacts.

According to the agency, the ministerial order was necessitated by the slow pace of most major foreign-invested projects.

Among the 100 largest projects that have been registered, 16 have a capital of more than $1 billion.

Some provinces have taken strong action against delayed projects this year.

The central province of Quang Nam, for instance, in May canceled a $4.15 billion resort project as the investor had failed to complete the required investment formalities.

A $200 million real estate project invested by South Korea’s AJ Vietstar Co has also been revoked by the southern province of Ba Ria-Vung Tau due to lack of capital.

Foreign direct investment to Vietnam totaled $11.57 billion in the first eight months, down 12.3 percent from a year ago, according to official statistics.