Bank shares lose lustre on capital raising drives

Tuesday, May 6, 2008
With the plans to increase by two or three times in chartered capital, most banks decide to offer preferential shares to employees with an aim to hold qualified workforce. Compared with the previous year, the preferential volume of bank shares for employees now seems to be more superfluous. However, due to the less attractiveness of bank shares, many employees are not too much keen on their bank shares though with very preferential prices.
Among 458 million ordinary shares with par value of 10,000 dong that Eximbank plans to issue to raise the chartered capital from 2.8 trillion dong to 7.38 trillion dong within this year, the bank will sell 12 million shares to employees with the price of no less than the face value. According to Eximbank, the share issue aims to set up a share fund for the policy of attracting qualified human resources called "Human Resources Development Fund" that will be maintained until 2010.
Similarly, in line with the approved plan, Asia Commercial Bank (ACB) will offer 2.5 million bonus shares among forthcoming 372.57 million shares at 10,000 dong par to its employees. This is a part of the bank's plan to hike the chartered capital from the current 2.63 trillion dong to 6.355 trillion dong in 2008. As estimated, about 2,500 employees are allowed to join the share offering under ACB's bonus share regulation.

Meanwhile, in the plan to increase the chartered capital up to 6.048 trillion dong from 4.449 trillion dong at the moment, Sacombank will issue three million shares worth 30 billion dong on par to its key employees with the selling price of 15,000 dong per share. Yet, the employees must pledge to hold preferential shares and derivative rights within three-years from the issue date.

For HCM City Housing Development Bank (HDBank), as a part of the plan to hike the chartered capital from one trillion dong to two trillion dong in this year, five million shares worth 50 billion dong on par enclosed with preferential interests will be offered to employees with the issue price of 10,000 dong per share equalling to the par value of the bank share. But, buyers are only members of director board, supervision board and management board of the bank. Additionally, the buyers must commit to hold these preferential shares within six months and derivative rights from the bank gains authorities' approval on capital increase. Also, Pacific Bank will offer 60,000 shares [accounting for 3% of the share volume in the plan to reach a chartered capital of two trillion dong] to its employees.

Factually, not all employees are enthusiastic with bonus shares or preferential shares of banks in forthcoming capital increases. Two-years ago when bank shares were still considered "king shares" in terms of attractiveness, a lot of employees expected to buy banks' bonus or preferential shares even at that time, issue price was higher 4-5 times over par. But currently, the selling price that equals to 1-1.1 times over par still does not satisfy employees because of the stock market slump. In fact, prices of bank shares were down 70-80% sharply as compared with the same period of 2006. Typically, the STB coded share price of Sacombank in April ever stood at only over 30,000 dong each while the bank announced to sell shares to employees at the price of 15,000 dong. Therefore, at present, the issue of preferential shares to increase chartered capital is unlikely an investment opportunity for employees, even it can become the challenge for many banks' leaders.