Two years ago, when bank shares declined, cash dividends always appealed to investors. Now, they only want to receive dividends in shares. At banks that are in the restructuring process, shareholders even demanded for share dividends to increase the banks’ capital.
In 2017, bank business prospered, banking stocks are gaining growth momentum, surpassing the face value of 10,000 dong.
So, receiving stock dividends at this time will be more profitable to investors and shareholders compared to cash dividends. The price of “King” shares is expected to rebound in the near future, attracting the interest of many people.
Financial analysts Phan Dung Khanh said with the positive forecast about the industry’s growth in 2018, banks set relatively high profit target, amounting to trillions of dong. That is also the reason why investors want to receive dividends in shares.
The reality shows that in the first few months of 2018, the share prices of many banks (VCB, HDB, VPBank and ACB) increased by no less than 40 percent, touching 70,000 dong; 46,000 dong; 64,000 dong and nearly 47,000 dong respectively in the last session of March 30 but are still promising.
According to Dr Bui Quang Tin (Hochiminh City Banking University), with positive business results in 2017, dividends are distributed to shareholders more positively and are mainly paid in shares.
This is supposed to have positive impacts on investors’ psychology, especially when stocks rise. However, not all banks are willing to make dividend payment to shareholders but keep as reserves, like Techcombank.
Under the pressure to increase financial capacity to meet Basel II standards, in this year’s annual general meeting (AGM) season, most banks have submitted plans to increase chartered capital, partly via dividends.
VPBank plans to raise its chartered capital by about 12 trillion dong in 2018, to more than 27 trillion dong.
The chartered capital increase plan will be divided into stages, including the dividend payment in shares and bonus shares from the chartered capital supplementary reserve fund, issuance of individual shares to employees (Employee Stock Ownership Plan ESOP), issuance of separate shares to call for investment from domestic and foreign investors and distribution of capital surplus.
In the submissions to VIB’s 2018 AGM, there is a statement on chartered capital increase by more than 2.4 trillion dong, to maximum 8.1 trillion dong, including Treasury share offering, issuance of new individual shares, distribution of bonus shares from reserve fund, investment and development, retained earnings, and equity surplus.
The meeting approved the dividend payment plan in cash and distribution of bonus shares amounting to 36 percent, including five percent cash dividends and 31 percent bonus shares.
Thanks to outstanding business results in 2017, leaders of HDBank plans to make payment of dividends and bonus shares at 25-30 percent in cash and shares to shareholders.
The specific method will be submitted to the AGM on April 21. In previous years when the banking sector had a lot of fluctuations, HDBank always maintained the dividend pay-out ratio at around 10 percent.
In the context that the banking market is booming, and bank shares receive the attention of investors, the “huge” dividends paid by HDBank will be the motivation for HDBank shares.
Though it is in the restructuring process, SCB has made changes in this year when taking about 600 billion dong from the supplementary chartered capital reserve fund and retained earnings to increase chartered capital, equal to the issuance volume of 60 million bonus shares (at 4.2 percent out of the chartered capital of 14.295 trillion dong) to pay for shareholders.
Nguyen Van Dung, Head of the Banking Supervision Agency (under the State Bank of Vietnam) said the dividends are paid after banks have classified debts and put full provisions for risks. Banks must meet their financial obligations to the State, and make provisions for funds as prescribed. The State Bank also encourages the dividend payment in shares to increase capital.
