Banks raise chartered capital to expand securities loans

05:30' 10/04/2008 (GMT+7)
VietNamNet Bridge – Commercial banks are rushing to raise their chartered capital, as they want to expand loans for securities investments.
Eximbank said that it plans to raise its chartered capital from VND2,800bil ($175mil) to VND7,380bil ($461.25mil) in 2008, which will help improve its financial capability and help it to expand securities credit.
Under the new regulations on funding securities investments, banks’ loans to securities investors must not exceed 20% of banks’ chartered capital. With VND2,800bil in chartered capital, Eximbank can use VND560bil ($35mil) at maximum for lending to securities investors. However, if the bank’s chartered capital is raised to VND7,380bil, the bank can lend up to VND1,476bil ($92.25mil) to securities investors.
Eximbank still considers securities credit a good business, and if banks can control risks well to optimise profit, they can get fat profit from the business.
Asia Commercial Bank (ACB) is one of the banks with the highest proportion of securities loans among commercial banks. However, it had to reduce securities loans after the central bank released the decision on tightening securities credit.
However, the bank said that it has not given up its plan to expand securities loans. After raising its chartered capital from VND2,630bil ($164.37mil) to VND6,355bil ($397.18mil) this year as expected, the bank’s capability to fund securities investment will be considerably improved.
In fact, experts have warned that lending for securities investments is highly risky. However, this still attracts bankers as it is a new kind of business in Vietnam, and there is still much room for banks. Many banks plan to focus on securities credit as they find it hard to compete with older banks in other services.
Western Bank has completed the increase of its chartered capital from VND200bil ($12.5mil) to VND1tril ($62.5mil), which means that it will be able to lend VND200bil ($12.5mil) to securities investors from the previous level of VND40bil ($2.5mil). The bank is now planning to push up securities loans with diversified products.
A similar plan is also being followed by Pacific Bank as the bank plans to raise its chartered capital from VND566.5bil ($35.4mil) to VND2,000tril ($125mil) in 2008.