After a prosperous year of business, many shareholders are expecting good dividend from banks. However, in the dividend payment plans expected to be submitted to shareholders for approval, dividends will mainly paid in shares, and some banks even will not pay dividend this year.
On March 22nd, Asia Commercial Joint Stock Bank (ACB) finalised the list of shareholders to attend the Annual general Meeting (AGM) in 2019. The meeting will be held on April 23rd. One of the important contents ACB expects to submit shareholders is the plan to increase charter capital from the issuance of shares for dividend payment.
This is also the precedent of ACB. In 2017, the bank paid dividend in shares at 15 percent, and in 2018, the rate is 30 percent, expected to reach a total of 3.740 trillion dong.
In 2018, ACB’s consolidated pre-tax profit was 6.388 trillion dong, up by 140.5 percent, completing 112.1 percent of the set plan (5.7 trillion dong).
At the same time, ACB also plans to sell treasury shares to increase capital. According to the bank’s financial statement in 2018, ACB is having 41.42 million treasury shares. According to HCM City Securities Company (HSC), the pre-tax profit in 2019 of ACB is forecasted at 7.772 trillion dong, and its bad debts after settlement will account for about one percent of the total outstanding loans.
For Vietnam International Commercial Joint Stock Bank (VIB), despite being recognised as completing the Basel II application, the bank is still under the pressure of raising capital. In March 23rd, VIB expected to submit to its shareholders a plan to increase capital to a maximum of 10.9 trillion dong, including the plan to pay bonus shares to shareholders and carry out private placement for investors.
In addition, the bank will propose the AGM to authorise the Board of directors to select the appropriate time to list shares on the HCM City Stock Exchange (HoSE).
The AGM season is approaching, dividends continue to attract attention of the market. However, shareholders of Vietnam Prosperity Commercial Joint Stock Bank (VPBank) perhaps will not receive good news after a year of waiting. The bank has consulted its shareholders the profit distribution plan for year 2018.
Accordingly, VPBank said that it achieved more than 7.355 trillion dong after-tax profit in 2018. After deducting 3.924 trillion dong for fund provisioning (reserve fund for supplementing charter capital, financial reserve fund and investment development fund), the undistributed profit of 3.431 trillion dong will be fully retained for supplementing capital for VPBank’s operation.
The fact that banks choose to pay dividends in shares is understandable. Currently, although banks’ profitability has improved, they are under the pressure of raising capital to meet the Basel II with much stricter capital safety standards. Hence, shareholders can hardly expect cash dividends. Even banks with state ownership (Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), and Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank)) have also repeatedly proposed to pay dividends in shares instead of cash.
Previously, in 2018, VPBank issued more than 925.6 million shares to raise its charter capital to nearly 25.3 trillion dong, in which 452.4 million shares were to pay dividends from the undistributed after-tax profit in 2017, over 15.4 million shares were for raising capital from the reserve fund for supplementing charter capital, and more than 457.7 million shares to increase capital from the share premium.
In 2018, Military Commercial Joint Stock Bank (MB) successfully increased its capital by paying dividend in shares. Specifically, MB increased charter capital by 3.450 trillion dong to nearly 21.605 trillion dong, thanks to the private placement of 345 million shares to pay dividends in the second phase of 2017 at a ratio of five percent, and distribute bonus shares at a ratio of 14 percent.
For Vietnam Technological and Commercial Joint Stock Bank (Techcombank), the bank paid dividends in bonus shares at a ratio of 1:2 in the third quarter of 2018, raising its charter capital by threefold to 34.956 trillion dong.
In the last quarter of 2018, Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) issued 37.5 million shares to pay dividends and 200 million shares to existing shareholders, in order to raise capital to 9.875 trillion dong. An Binh Commercial Joint Stock Bank (ABBank) also approved the plan to issue shares for paying dividends at a ratio of 7.4 percent, equivalent to an issuance of more than 39.3 million shares.
Southeast Asia Commercial Joint Stock Bank (SeABank) carried out three share issuances for its employees, for dividend payment and for offering to existing shareholders. The total issued shares were more than 222.2 million shares, raising the charter capital to 7.688 trillion dong. Tien Phong Commercial Joint Stock Bank (TPBank) planned to pay dividends in shares and distribute bonus shares to existing shareholders at a total ratio of 28 percent in order to increase charter capital to 8.566 trillion dong.
According to the government’s target, by the end of 2020, the charter capital of private joint stock banks will basically meet the Basel II requirements, in which at least 12 to 15 banks successfully apply the Basel II standard method and more.
By the end of 2025, all commercial banks shall meet the standard Basel II, pilot the advanced Basel II at state-owned commercial banks and private joint stock banks with good governance quality. The deadline is getting close, but so far, only two banks in the list of 10 banks for piloting the Basel II (including Vietcombank and VIB) and one bank outside of this list (Orient Commercial Joint Stock Bank OCB) have officially applied he Basel II.
However, these banks are still under the pressure to increase capital in order to ensure their Capital Adequacy Ratio (CAR) to comply with the new requirements. For the remaining 10 banks, raising capital to meet the Basel II is more urgent. Many restructuring banks are also required to do so. Thus, banks’ cash dividends seem to hardly return soon.
