Banks race in technology application, capital increase
VIETNAM, March 12 –
A customer at a VietinBank office in Hà Nội. Photo VNA/VNS
HÀ NỘI — Banks have been rushing to apply technology and raise capital to improve their competitiveness and comply with the regulations of the State Bank of Vietnam (SBV).
According to experts, the digital application has helped banks reduce operating costs, increase asset quality and reduce the cost of credit risk provisions, while the capital increase has helped improve the capital adequacy ratio (CAR) to meet SBV regulations.
Vietnam International Securities Joint Stock Company (VIS) said many banks had spent millions of US dollars to develop basic banking systems, which helped their customers easily connect and make automatic payments on platforms. mobiles. This investment has helped the banks attract a large number of new customers.
Sharing the same view, Vietcombank’s Securities Company (VCBS) said many banks aim to boost digital transformation, digital banking and ecosystems in the 2020-25 period.
Technology is playing an increasingly important role in banking. Automated banks such as TPB Live Bank and MBB Smart Bank allow customers to open cards, deposit and withdraw money with their fingerprints. With this investment, the banks have so far achieved initial success.
According to the VIS, investing in digitalization to facilitate customer transactions has helped banks attract more customers, which helps to increase banks’ current savings account (CASA) ratio.
A higher CASA ratio indicates a lower cost of funds, as banks generally do not charge interest on checking account deposits and interest on savings accounts is generally very low. If a large portion of a bank’s deposits come from these funds, it means that the bank obtains these funds at a relatively lower cost. It is generally accepted that a higher CASA ratio leads to a higher net interest margin (NIM).
Given that the banks’ NIM has slowed since the third quarter of last year and is expected to continue in the first quarters of 2022 due to the implementation of preferential interest rate programs and SBV requirements in terms of capital adequacy and reserve ratios, forecast banks in VIS should digitize more and more to enable them to further mobilize the source of cheap capital.
In addition, VIS said, digitalization has also helped banks reduce operating costs and improve asset quality, thereby helping to reduce the cost of credit risk provisions.
Besides digital enforcement, banks, especially state-owned banks, should also continuously increase their registered capital this year to strengthen their financial strength and comply with SBV regulations on capital adequacy ratio.
Vietcombank, for example, is expected to issue more than 1.02 billion shares to pay dividends from the remaining profits in 2019 at the rate of 27.6% in 2022. After the issuance, the share capital of Vietcombank will increase by 10.23 trillion VNĐ to reach more than 47,320 billion VNĐ.
The public bank also plans to make a private placement of nearly 308 million shares, equivalent to 6.5% of its share capital, with up to 99 investors, which will bring the bank’s share capital to more than 50,400 billion VNĐ. The bank also plans to continuously increase its share capital to VN54.13 trillion in the near future by paying stock dividends.
Vietnamese banks increased their capital by more than 23%, or more than 92 trillion VNĐ, last year. Leading banks in last year’s capital raise included VPBank (up 78%), SHB (up 52%), TPBank (up 48%), VIB (up 40%) and MBBank (up 35%). ). —VNS