No dividends: What are the banks’ intentions?

VCN – In dividend season this year, many banks have passed a decision not to pay dividends to retain profits to serve business needs. For shareholders, these decisions do not bring much joy, though according to the banks, this is a “trade-off” for future development.

Many banks do not pay dividends to meet business goals. Source: Internet

Missed appointment by “blood clot” at VAMC

At the General Meeting of Shareholders of Vietnam Maritime Commercial Joint Stock Bank (MSB), Huynh BuuQuang, Vice Chairman of MSB’s Board of Directors, said the remaining profit of 2019 was nearly VND900 billion. However, if dividends are affected, MSB’s ability to operate will be further developed.

In 2020, MSB aims to completely handle bad debt bonds under management at Vietnam Asset Management Company (VAMC). According to the regulations of the State Bank of Vietnam (SBV), banks that have not yet handled NPLs at VAMC cannot receive dividends. Therefore, he promised that, in 2021, he will pay dividends to shareholders, because in 2019, the General Meeting of Shareholders has approved the plan not to pay dividends for 2019 but to pay 10% dividends for 2020, but until now cannot do it again.

Similarly, Saigon Commercial Joint Stock Bank (SCB) has not paid a dividend for many years, while total assets have increased many times. This makes many shareholders disagree and require a dividend. But according to SCB’s leaders, the dividend payment without permission is very difficult, because the bank is still in the process of handling bad debts managed at VAMC.

At Vietnam Export-Import Commercial Joint Stock Bank (Eximbank), in order to paydividends to shareholders, this bank also has to handle about VND3,300 billion of bonds being managed at VAMC. However, by the end of 2019, Eximbank has made a provision of VND2,100 billion. So, the bank also needs more than VND1,000 billion to settle all bonds at VAMC. It is expected that this can be done in June 2020, when all is done,Eximbank can plan its dividend payment as prescribed.

Not divided and then… not divided

According to the document of the Annual General Meeting of Shareholders in 2020 of AnBinh Commercial Joint Stock Bank (ABBank), the Board of Directors intends to submit to the General Meeting of Shareholders through the distribution of profits, with the proposal of allowing to retain all undistributed profit after tax. This means that ABBank will not pay dividends to shareholders. While before that, in 2019, the bank’s General Meeting of Shareholders also approved the plan of not paying dividends to shareholders, the whole remaining profit in 2108 of VND624 billion was retained to continue increasing financial capacity. Therefore, the total remaining undistributed profit is now over VND1,403 billion.

The Board of Directors of this bank explained that the retained profit after tax is to accumulate capital to enhance financial capacity, to meet the requirements of SBV regulations and the bank’s development needs in the coming years. This is necessary so the Board of Directors proposes to retain all remaining after-tax profits to increase charter capital.

Another bank that continues to not pay dividends is Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank). This made many shareholders of Sacombank “annoyed” with the fact that for many years the bank did not pay dividends, although the business results were very good and the accumulated profit also reached a high level. The reason given by the bank’s management is that the SBV has not yet agreed with Sacombank’s proposal to share dividends by shares because it is in the restructuring phase. Therefore, Sacombank’s leaders only know that by 2022-2023 there will be a breakthrough, when the bank is restructured, it will be stronger and dividends will be paid.

For Vietnam Prosperity Joint Stock Commercial Bank (VPBank), in 2019 and 2020, the bank did not pay dividends but leave profits to develop the bank. Bui HaiQuan, Vice Chairman of VPBank’s Board of Directors, said this is a trade-off because the bank’s goal of keeping money is for bank development, because the banking industry needs continuous growth to ensure market share and the safety ratio, so it is not possible to meet the regular annual cash dividend.

In fact, as soon as the Covid-19 pandemicbroke out domestically in March, the SBV instructed credit institutions to adjust their business plans and financial plans in line with the reality before the shareholdersmeeting, in the immediate future, do not pay cash dividends in order to focus resources on sharply reducing lending interest rates on current and new loans. Therefore, one part is to comply with this requirement of the regulatory authority, one part is to meet financial plans, especially capital raising plan, banks, one is not dividend, and the other is divided by stock dividends.

The recent General Meeting of Shareholders of TienPhong Commercial Joint Stock Bank (TPBank) has approved to increase the charter capital from VND8,566 billion to VND10,199 billion by paying 20% ​​of the stock dividend, expected to be implemented in the third and fourth quarter of 2020. Orient Commercial Joint Stock Bank (OCB) has set a target of 25-27% stock dividend to increase its capital by VND1,299 billion. Asia Commercial Joint Stock Bank (ACB) pays 30% dividend by stock. Ho Chi Minh City Development Commercial Joint Stock Bank (HDBank) plans to issue bonus shares and pay a dividend of 65%.

By Huong Diu/ HuuTuc

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