In this year’s annual shareholders meeting (AGM) season, in addition to banks which said no to dividends due to restructuring, the remaining banks all pay dividends in shares.
The reason for not distributing dividends in cash, according to banks, is that share dividend payment helps banks retain resources to support customers hit by the Covid-19 pandemic according to regulations of the State Bank of Vietnam (SBV), and also increases banks’ charter capital, thereby improving their financial capacity, meeting Basel II standards, etc.
In the plan to increase charter capital from 3.890 trillion dong to seven trillion dong in 2019 and 2020 of Nam A Commercial Joint Stock Bank (NamABank), the bank will issue shares to pay dividends to shareholders and carry out a private placement for investors.
In 2019, NamABank completed the first phase of the capital increase by share issuance, raising the charter capital from 3.353 trillion dong to over 3.890 trillion dong. Currently, the bank has completed necessary legal procedures for the second phase of capital increase in order to raise its charter capital from 3.890 trillion dong to five trillion dong. It is expected that NamABank will complete this plan in the third quarter (Q3) of 2020.
Regarding the plan to increase charter capital from five trillion dong (after the second phase of capital increase) to seven trillion dong, NamABank will issue 57 million shares (equivalent to 570 billion dong at face value of 10,000 dong per share) to pay dividends at a rate of 14.65 percent and offer 143 million shares via a private placement (equivalent to 1.430 trillion dong at par value).
Responding to shareholders about not paying dividends in cash, NamABank’s general director Tran Ngoc Tam said that in the process of restructuring and according to the general orientation of the SBV, banks must focus resources to restructure its operations and enhance financial capacity. Therefore, NamABank pays dividends in shares to increase charter capital and enhance financial capacity, instead of cash. On the other hand, at the request of the SVB in Circular 02, in the context of the difficult market due to the Covid-19, banks must focus their resources to support customers, so not pay cash dividends like the previous years.
The 2020 AGM of HCM City Development Commercial Joint Stock Bank (HDBank) held in June 2020 has approved the profit distribution plan for year 2019 and the issuance of bonus shares from the share capital surplus. Accordingly, HDBank’s shareholders will receive 50 percent dividends in shares and 15 percent bonus shares, totalling up to 65%. The bank’s charter capital after that will increase to over 16.088 trillion dong.
Answering shareholders’ question about HDBank’s share dividend payment this year instead of the cash dividends in the previous year, the bank’s leader said that it is due to the requirement of the SBV, and HDBank itself also wants to increase charter capital in order to improve financial capacity. Thus, paying dividends in shares is necessary.
Speaking at the AGM held in late June 2020, Chair of the Board of directors (BOD) of Vietnam International Commercial Joint Stock Bank Dang Khac Vy said that before shifting the trading of shares from the Unlisted Public Company Market (UPCoM) to the HCM City Stock Exchange (HoSE), in November 2020, VIB will increase charter capital from 9.245 trillion dong to 11.094 trillion dong by distributing bonus shares at a ratio of 20%, etc.
Expectation for attracting more foreign capital
At Orient Commercial Joint Stock Bank (OCB), the bank plans to distribute 2020 dividends at 25 27 percent and sell 15 percent of stake to Aozora Bank to increase charter capital to over 11.285 trillion dong. According to the bank’s Chair of BOD Trinh Van Tuan, after completing this plan, OCB will list its shares on the HoSE.
Explaining the postponement of the listing for many years, Tuan said that OCB’s orientation is to complete the sale of capital to foreign strategic shareholder before listing shares on the stock market.
“The end of 2017 and early 2018 is the golden time for listing, but at that time, OCB’s strategic shareholder BNP Paribas fully sold over 74 million shares of OCB, equivalent to 18.68 percent of capital, after 10 years of investment. After the divestment of BNP Paribas, OCB sought another strategic shareholder and on June 29th, the bank successfully issued shares to Aozora Bank from Japan (AOZ). This is the basis for OCB’s listing, and the rest depends on market conditions,” said Tuan.
Despite completing the sale of 15 percent of stake to Aozora Bank, OCB’s shareholders are still concerned about the potential of the new strategic partner. Talking about this, Chair of the bank said that the two banks have signed as strategic cooperation, Aozora commits long-term investment in OCB by assigning experts to join OCB’s governance, support business development, retail activities, risk management, technology improvement, digital banking, etc.
Regarding the listing of shares, the shareholders meeting of NamABank has approved the listing of shares on the HoSE this year. At the same time, in the plan to increase charter capital to seven trillion dong, NamABank also aims to perform a private placement for domestic and foreign investors. In particular, the ratio of shares the bank expects to sell to foreign investors is more than 20%.
In 2020, Lien Viet Post Bank Commercial Joint Stock Bank (LienVietPostBank, LPB) plans to increase capital to 10.746 trillion dong by paying share dividends at a rate of 10%. At the same time, LPB will raise the ownership limit of foreign investors from five percent to nearly 10%.
The 2020 AGM of LienVietPostBank has approved the proposal to raise foreign ownership room from five percent to the maximum of 9.99 percent of the bank’s charter capital in order to conduct a private placement for foreign investors. According to the bank’s Chair Huynh Ngoc Huy, raising ownership rate of foreign investors not only contributes to increase the liquidity of LPB shares and improves the capital mobilisation capacity when necessary, but also changes the shareholder structure in the direction of integrating with international market, improving the bank’s position of the bank in the market, contributing to increasing the value for shareholders.
For VIB, after successfully increasing charter capital to 11.094 trillion dong, the bank’s list of major shareholders remains unchanged. Commonwealth Bank of Australia still holds 20 percent of VIB capital and the total ownership of foreign investors is maintained at 20.24%, of which 0.06 percent is owned by individual investors and 20.18 percent is owned by institutional investors.
In addition to the above banks, Saigon Commercial Joint Stock Bank (SB) is also in the process of negotiating with foreign strategic investors to seek good cooperation thereby increasing its charter capital. However, according to financial analysts, the current policy is different to the previous time, banks do not focus on one strategic investor. On the other hand, foreign investors consider investment in a bank more like a short-term financial investment than a long-term commitment with the bank.
