Many banks have made big profits, but many have asked not to pay dividends or pay stock dividends this year.
Trillion club
After 2017, 2018 continues to be considered a successful year for the banking industry when a series of banks recorded positive results and profit growth compared to the previous year.
Statistics from the 2018 financial reports of 25 banks shows that up to 21 banks (equivalent to 84%) recorded growth in profits, of which up to 16 banks were present in the trillion club.
With the advantage of assets and scale, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) still holds the leading position with 2018 pre-tax profit of up to 18.269 trillion dong, up 61 percent compared to 2017, being the highest growth rate in many years.
Meanwhile, a private bank has, for the first time, shown up at the second place. By the end of 2018, the profit before tax of Vietnam Technological and Commercial Joint Stock Bank (Techcombank) reached 10.661 billion dong, up 32.7 percent over the previous year. This is also the first private bank to achieve this figure.
Standing at the third and fourth places are Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) and Vietnam Prosperity Joint Stock Commercial Bank (VPBank) with the profit of 9.473 trillion dong (up 9.3%) and 9.2 trillion (up 13%) respectively.
Banks such as Military Joint Stock Commercial Bank (MB) and Vietnam Bank for Agriculture and Rural Development (Agribank) also achieved record high profits with respectively 7.767 trillion dong and 7.525 trillion dong.
Continue to say no to dividends in cash
After a good year of business, many shareholders are waiting for good news.
However, this year, they may continue to be disappointed when a series of banks have refused to pay dividends or proposed to pay stock dividends.
The reason given is to improve financial capacity and ensure safety standards in banking operations.
Asia Joint Stock Commercial Bank (ACB) is an example. The bank made a dividend payment by shares at the rate of 15 percent for 2017; the bank will submit to shareholders to approve the dividend payment plan with shares at the rate of 30 percent for 2018 and 20 percent for 2019.
At the recent Annual general Meeting of Shareholders, Nam A Joint Stock Commercial Bank (Nam A Bank) also approved a plan to pay dividends at the rate of 16 percent by shares.
According to Nam A Bank’s leader, the purpose of stock dividend payment is to increase its charter capital and financial capacity. Currently, the bank’s chartered capital is only 3.35 trillion dong.
Even the ‘king of cash dividend’, Hochiminh City Development Joint Stock Commercial Bank (HDBank), has, for the first time since the merger of DaiABank, paid dividends, planned to pay dividends only by shares (10%).
Meanwhile, also from the need to supplement capital, a series of other banks have decided to retain profits and not to pay dividends such as Techcombank, VPBank, and Kien Long Joint Stock Commercial Bank (Kien Long Bank).
According to the latest statistics from the State Bank of Vietnam, by the end of January 2019, capital adequacy ratio (CAR) of the whole system continued to decline to 11.57 percent from 12.14 percent at the end of 2018.
In which, CAR of state-owned commercial banks continued to be the lowest, down to 9.31 percent from 9.52 percent a month earlier. CAR of joint stock commercial banks also dropped from 11.24 percent to 10.56%.
It is worth mentioning that the obtained numbers are calculated based on the current standards. If applied under Basel II standards, many banks are below the standard.
Obviously, capital increase is an urgent need when the deadline for applying Basel II standards is near. Circular 41 of the SBV with official regulation to apply this capital standard will be valid in only seven months.
Meanwhile, in the recent time, the SBV also issued many new circulars towards tightening the system safety standards.
Among them is the draft circular on purchase, sale and handling of bad debts of Vietnam Asset Management Company (VAMC).
According to this draft, debt-selling credit institutions that receive special bonds must not pay cash dividends to improve their financial capacity and create bad debt processing sources until the special bonds are terminated.
This also means, if the circular is passed, the dividend will not only stem from the subjective desire of bankers, but will also be governed by the official regulation.
Statistics from the 2018 audited financial statements of 24 banks shows that, by the end of 2018, up to 19 banks still hold special bonds of VAMC with a total value of up to 126.7 trillion dong.
In fact, banks’ request to ‘postpone’ dividend payments or pay dividends by shares is no longer new in recent years. With the indispensable demands of this special sector and new regulations, earnings are likely to continue to be retained in the future.
