State-run Joint Stock Commercial Bank for Foreign Trade of Vietnam (VietinBank) plans to put its entire shareholding in Saigon Bank for Industry and Trade (Saigonbank) for auction, announced the former on October 4.
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In 2016, VietinBank sold 17 million shares or 5.48% stake in Saigonbank with starting price of VND10,800 (US$0.46) apiece, reducing its holding to the current 4.91%.
Viet Dragon Securities Corporation (VDSC) has released a note forecasting the pre-tax profit of VietinBank to reach VND10.1 trillion (US$430 million) in 2018.
VietinBank's total operating income (TOI) grew 6.2% year-on-year to VND17.3 trillion (US$731.57 million) in the first half of 2018. While net interest income (NII) grew 7% year-on-year and associated income declined 62%, services income became the bank's driver with 32% year-on-year growth.
VietinBank's capital adequacy ratio (CAR) almost approached the minimum ratio under Circular 36's requirement and shortfall under Basel II's criteria. Therefore, the Vietnamese lender has been under urgent need to raise its Tier 1 capital. Increasing its general provision fund will also help, though it is not enough.
Meanwhile, raising charter capital will play a key role. Investors all know that such method has not been easy for VietinBank due to the state's ownership is at the minimum of 65% and the government doesn't intend to allocate any State budget into commercial banks.
Decision 986 on August 8, approving the development strategy of Vietnamese banking sector, mentions the government's plan to reduce its ownership in state-owned banks to 51%. Though VDSC expected the processing will not work until 2020 or later, it brings a new hope for VietinBank's capital raising ability.
Currently, Bank of Tokyo-Mitsubishi UFJ is the largest strategic shareholder of VietinBank with 19.73% strategic stake, or equivalent to 734.6 million shares. Meanwhile, IFC Capitalization Equity Fund and International Finance Corporation hold 5.39% and 2.63% shares, respectively. The State Bank of Vietnam (SBV) representing the government in holding state fund of 64.46% shares of VietinBank, or 2.4 billion shares.
As of June 2018, Saigonbank's total asset value reached VND20.72 trillion (US$888.24 million), up 5.35% year-on-year. The bank mobilized capital worth VND17 trillion (US$728.71 million), up 7.63% year-on-year, of which deposits amounted to VND14.22 trillion (US$609.54 million).
Additionally, the bank's total outstanding loans stood at VND13.85 trillion (US$593.68 million) during the period, up 5.7% year-on-year.
In the first six months of 2018, Saigonbank posted pre-tax profit of VND112 billion (US$4.8 million), down 30.2% year-on-year and equivalent to 75% of the year's target. Notably, the bank's bad debt ratio in the January - June period was 6.48% or VND897 billion (US$38.45 million).
