Why does NCB increase capital by private issuance instead of public issuance?

Foreign room lock 9%

One of the notable contents in the 2023 Annual General Meeting of Shareholders of National Citizen Commercial Joint Stock Bank (NCB, HNX: NVB) is that the bank plans to increase its charter capital from VND 5,601 billion to VND 11,800 billion.

Responding to shareholders' questions about this plan, Ms. Bui Thi Thanh Huong - Chairwoman of the Board of Directors of NCB said that the bank's Board of Directors chose the option of issuing a maximum of 620 million shares privately in accordance with the roadmap of Project 80 which was previously approved. However, the bank's Board of Directors expects to complete this plan earlier than the target and no later than 2025.

Explaining the reason for choosing the private issuance option instead of public issuance, Ms. Huong said that because strategic investors have technology and experience, it is not excluded that they could be foreign shareholders - this is also the guiding requirement of the management agency when foreign strategic shareholders have enough capital to commit long-term to the bank's development.

Finance - Banking - Why does NCB increase capital through private issuance instead of public issuance? — NCB Board Chairwoman Bui Thi Thanh Huong.

Regarding the criteria for selecting investors, the Chairman of NCB said that the selection criteria will be ensured according to legal regulations. Currently, the bank still has the support of Japanese and British shareholders, and the locking of NCB's 9% foreign room is also to ensure the opportunity to choose the right time, partner and time in the future.

Regarding the capital increase target, according to Ms. Huong, there are 3 main targets including network investment, choosing to relocate the business location. In addition, technology investment is a mandatory requirement, in line with the trend.

This may increase costs in the first 1-2 years but will be effective in the future, along with a more timely risk management and compliance monitoring system. Next, strengthen financial capacity, according to international standard indicators.

Put liquidity first

Responding to shareholders' questions about the impact of the SCB incident on small banks, Mr. Nguyen Dinh Tuan - Permanent Deputy General Director of NCB said that this incident happened in October last year, with a chain reaction in November, when many shareholders raised doubts about the bank's operational risks.

In the fourth quarter of 2022, NCB made efforts to increase total capital mobilization to VND 6,300 billion, although interest rates were no longer in the Top 3 of the market as before, but only maintained 8th and 9th positions in the market.

According to Chairwoman Bui Thi Thanh Huong, NCB's Board of Directors always puts liquidity safety first, especially after the recent crisis. NCB has maintained its liquidity reserve ratio at 24.09%, twice as high as the State Bank's prescribed ratio.

In addition, the Congress also discussed NCB's contract with Sun Group, which will focus on mobilizing deposits from customers with good financial potential. In early 2022 and late 2021, customers introduced by strategic shareholders always maintain deposit balances at NCB from 2,000 to more than 2,000 billion VND, which are non-term deposits (CASA) with very cheap capital costs.

Finance - Banking - Why did NCB increase capital through private issuance instead of public issuance? (Figure 2). — NCB's 2023 General Meeting of Shareholders.

According to Ms. Huong, NCB's credit operations do not conduct any medium or long-term loans related to customers introduced by strategic partners, but focus on short-term terms of up to 9 months to increase revenue and adjust the best lending interest rates. In addition, the contract also helps to increase the non-credit segment compared to the previous year, opening LCs, international payments, etc.

The bank has now prepared a new project to submit to the State Bank. NCB has proposed a roadmap for the above solution not only based on the status of the old project but also supplemented with the latest situation. The bank has also hired consulting firm EY to make appropriate recommendations for solutions.

At the General Meeting, NCB shareholders also approved the dismissal of two members of the Board of Supervisors, Ms. Tran Thi Ha Giang - Head of the Board of Supervisors and Ms. Tran Thi Minh Hue, both of whom submitted resignations for personal reasons. After being dismissed, these personnel still wish to continue contributing to NCB.

At the same time, the new Board of Supervisors consisting of 3 members was elected, of which Ms. Do Thi Duc Minh, currently Deputy General Director of NCB, was elected as the new Head of the Board of Supervisors for the 2020 - 2025 term .

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