State-owned commercial banking sector performs optimistic growth, but more capital in need

The bad debt ratio of the "big 4" decreased

Specifically, by the end of 2023, the total liabilities and equity of the state-owned commercial banks including Agribank, BIDV, Vietcombank and VietinBank reached more than VND 8.2 million billion, an increase of nearly 8% compared to the end of 2022.

In terms of capital use, the total outstanding debt of these banks recorded nearly VND 6 million billion, an increase of nearly 13% compared to the end of 2022.

Credit quality was guaranteed, bad debt compared to the total outstanding debt in 2023 was VND86 trillion, an increase of 10.5% compared to the end of 2022. Compared to the total outstanding debt, the bad debt ratio was at 1.29%, down from 1.32% in 2022.

In terms of investment, by the end of 2023, the total balance of investment securities of these 4 banks was nearly 735.7 trillion VND, down 11.4% compared to the end of last year.

Regarding business results, the after-tax profit margin on equity (ROE) by the end of 2023, according to the consolidated report of state-owned commercial banks, achieved 18.62%.

According to the report, state investment capital at these banks continues to be preserved and profitable. Investment projects in construction and asset procurement are guaranteed to be synchronous and modern...

Vietcombank is being proposed to add more than VND20,695 billion in capital. Photo: ST

Additional capital of more than VND 20,695 billion for Vietcombank

However, currently, the operations of state-owned commercial banks still face many difficulties, especially in optimizing capital due to many complicated review processes to gain approval from competent authorities.

Previously, at the 5th Session in June 2023, the National Assembly approved the policy of investing additional charter capital for Agribank in the 2021-2030 period corresponding to the remaining profit actually paid to the state budget in the 2021-2023 period of the bank, up to a maximum of VND 17,100 billion.

Notably, it is expected that in the 8th Session, the National Assembly will consider and decide on the policy of investing state capital in Vietcombank at the proposal of the Government.

According to the Government's submission to the National Assembly on this issue, in the 5-year period (2019-2023), Vietcombank's total assets witnessed an increase of an average rate of 10.6%/year to 14.6%/year while the bad debt ratio in 2023 recorded 0.99%.

The average pre-tax profit in the 2021-2023 period increased by 26%/year. The average return on assets and equity (ROA, ROE) was approximately 1.6% and 23%.

Furthermore, according to Vietcombank's report, the minimum capital adequacy ratio (CAR) by the end of 2023 was 11.05%, although it complied with regulations, it was much lower than many private commercial banks in Vietnam (VPBank and MB were 12-13%, Techcombank was 13-15%).

Vietcombank's CAR was also much lower than that of banks in the Asia and Southeast Asia region (the average CAR of Indonesian, Thailand, Myanmar, Singapore and Australia were 23.27%, 20.24%, 18.9%, 17.1% and 16.6%, respectively...)

In fact, if the target CAR is 13.5% in 2026, the equity capital deficit in the period of 2024-2026 will be VND 118,166 billion. Although with the current financial foundation and expected business results in the period of 2024-2026, Vietcombank can accumulate and reach the equity capital level by the end of 2026 of VND 182,635 billion.

Therefore, the additional investment of state capital from the remaining accumulated profit up to the end of 2018 and the remaining profit in 2021 is extremely necessary for Vietcombank to ensure the CAR ratio.

Thus, the Government proposed that the National Assembly approve the policy of additional state capital investment of more than VND 20,695 billion to maintain the state capital contribution ratio at Vietcombank.

The additional investment capital comes from dividends in shares distributed by state shareholders from the remaining accumulated profits up to the end of 2018 and the remaining profits in 2021 of Vietcombank.

In the review report, the National Assembly's Economic Committee agreed with the necessity of additional investment of state capital at Vietcombank.

However, the Economic Committee requested the Government to clarify a number of issues, including adding the opinions of foreign strategic shareholders (Mizuho Corporate Bank, which is holding 15% of Vietcombank's charter capital, ensuring consensus and feasibility in the process of increasing charter capital).

In addition, many opinions also suggested clarifying the structure of using additional invested capital at Vietcombank on the basis of ensuring suitability and consistency with the purpose of additional investment of state capital, focusing on expanding business activities, providing credit, continuing to innovate the governance model, etc.