Thick cushion
The decision issued on November 14, 2023 by the Governor of the State Bank of Vietnam (SBV) officially allowed VPBank to increase its charter capital from VND 67,434 billion to VND 79,339 billion.
VPBank's Board of Directors previously announced a resolution to amend the bank's charter capital after completing the private placement of 15% of shares to strategic investor Sumitomo Mitsui Banking Corporation (SMBC) last October.
The private placement of 1.19 billion VPB shares to Japan's second largest financial institution by total assets has brought VPBank more than VND35.9 trillion (equivalent to nearly USD1.5 billion) in Tier 1 capital. VPBank's equity, accordingly, increased from VND103.5 trillion to approximately VND140 trillion, closely following the giant Vietcombank. This capital sale activity has been implemented by VPBank since 2022, in an effort to strengthen long-term financial capacity and help the bank achieve growth targets in the third 5-year development strategy (2022-2026).
The bank's capital adequacy ratio (CAR), according to calculations by international credit rating agency Moody's, will increase to nearly 19% - leading among banks in Vietnam assessed by this organization, after the above transaction. This ratio is also much higher than the average CAR, according to Circular 41, of the joint stock commercial banking sector of 11.5% and approaching the average threshold of 20.87% of foreign banks as of the end of September 2023, according to data from the State Bank of Vietnam.
A large capital base will significantly strengthen VPBank's financial strength, thereby allowing the bank to meet all customer needs in strategic segments such as individual customers and small and medium enterprises (SMEs). At the same time, VPBank will have enough financial capacity to serve large-scale corporate customers. In addition, strategic investor SMBC is expected to contribute to VPBank's growth with the know-how and experience that the group has accumulated over many years in many Asian markets.
Maintain continuous growth
With a thick capital buffer and strong financial foundation, VPBank is ready to meet its continuous growth plans in the coming years.
According to VNDirect Securities Company, VPBank's sale of 15% of its charter capital to SMBC, helping to increase its total equity to nearly VND140 trillion, is expected to expand the bank's customer base to FDI companies, especially those related to Japan.
"We therefore raise our loan growth provisions for 2023, 2024, and 2025 [respectively] from 25, 23, 18% to 28, 25, 20%, the highest in the industry, to reflect the bank's strong capital base," VNDirect wrote in a report released in mid-November.
In fact, VPBank's credit growth at the end of the third quarter increased by more than 22% compared to the beginning of the year, reaching more than VND488 trillion. Of which, credit growth in the individual customer segment increased by 19% compared to the beginning of the year, reaching more than VND232 trillion.
In the first 9 months of the year, VPBank increased the disbursement of a number of loan products with stable risk levels and created sustainable growth. In the home loan segment, VPBank focused on secondary home loans (growth rate of 25%), production and business loans - focusing on lending to production and business households (growth rate of 22%), and for the unsecured loan segment, the bank continued to maintain its leading position in terms of spending turnover on cards and issued cards with outstanding credit card balance growing by 19%.
The bank's credit growth is many times higher than the industry average credit growth of 6.9% at the end of September. However, this growth rate is still lower than the credit growth rate of over 30% achieved in previous years. This slowing growth rate comes from VPBank's selective credit growth orientation, prioritizing quality, in line with market and economic developments.
To maintain a healthy balance sheet, VPBank maintained a steady growth momentum of mobilization in the third quarter, reaching nearly VND462 trillion, up nearly 35% compared to the beginning of the year, 5.9% higher than the industry average.
Notably, the bank's individual customer segment recorded an impressive 60% growth in deposits compared to the beginning of the year, thanks to its segment coverage strategy and "mobilization for all" program, in addition to a suite of specialized payment account products packaged and tailored to user needs.
Demand deposits (CASA) - the bank's low-cost capital source, of which, achieved a growth of more than 22% compared to the beginning of the year, contributing to raising the CASA ratio to 17% in VPBank's mobilized capital structure.
Along with promoting CASA, VPBank has increased the exploitation of international capital sources with long terms and reasonable costs to optimize input capital costs, thereby lowering lending interest rates, bringing capital into the economy, meeting loan demand for production-business, consumption and green projects, combating climate change.
The ratio of short-term funds to long-term loans of banks, according to SBV regulations, was at 26.6% at the end of September, below the regulatory agency's required threshold of 34% (decreasing to 30% starting from October 1, 2023).
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