Shareholders of Major Lenders Likely to Get Dividends Soon?

After a long waiting time, shareholders of the three giant lenders, namely Vietcombank, VietinBank and BIDV, are likely to receive stock dividends soon.

Until recently, Vietcombank, VietinBank and BIDV completed their 2021 Annual General Meetings of Shareholders. They planned to make a sharp increase in share capital, including plans to pay stock dividends and issue shares in the private placement for this purpose.

What their shareholders have been concerned most about over the years is their plans for share dividends, sourced from their enormous accumulated retained earnings. This is also what these banks wish to quickly have stronger capital to ensure operational requirements.

That requirement is specific and practicable. First of all, their capital adequacy ratio (CAR) has not yet been raised enough, as their registered capital has not been increased enough, just near the level specified in Circular 41. This is one of the reasons for the State Bank of Vietnam (SBV) to assign a relatively low credit growth target at first.

In 2021, except Vietcombank that was assigned a relatively high credit growth target of 10.5%, the rest was only around 7%. Looking at the private equity sector, due to its well-balanced share capital with prudential ratios, their assigned credit growth target is higher, like Techcombank with 12%.

In addition, the lower registered capital may affect the credit ratings.

Capital raising requirements are also specifically measured. Vietcombank’s current registered capital is about VND21,000 billion, lower than that in the Restructuring Plan for 2020 approved by the SBV.

Vietcombank, Vietinbank and BIDV successfully hosted their shareholder gatherings for this year where their capital raising plans, with a focus on stock dividend options, were approved.

VietinBank has two options for dividends. Option 1 is when dividend payment is made, VietinBank has not completed the share capital increase from share dividends sourced from net earnings, provisions for funds in 2017 and 2018 and net earnings, provisions for funds and cash dividends in 2019. With this option, VietinBank will pay 5% cash dividends and 17.7% share dividends.

Option 2 is when dividend payment is made, VietinBank has completed raising the share capital from stock dividend, sourced from net profit, provisions for funds in 2017-2018 and net earnings, provisions for funds and cash dividends in 2019. In this case, VietinBank asked its shareholders for paying a 5% cash dividend and 12.6% stock dividends.

At BIDV, the capital raising plan will include issuing 207.3 million shares for dividend payment for 2019 (rate at 5.2%), issuing 281.5 million shares for dividend payment in 2020 (rate at 7%) and issuing 341.5 million new shares in a public offer or a private placement, equivalent to 8.5% of the registered capital.

At Vietcombank, the share capital increase is based on two components. In the first component, after paying an 8% cash dividend, the stock dividend rate for the past years will be at 27.6%. The second component is made via a private offering where it planned to sell 6.5% of stake.

No specific timing has been chosen for all of the above plans. BIDV expected to pay share dividends in the third and fourth quarters of 2021.

Because the government holds controlling interests in these three banks, if stock dividends are made, the government will continue to invest in them.

In October 2020, the Government issued Decree 121 amending and supplementing Decree 91/2015 on State capital investment in enterprises and management and use of State capital and assets in enterprises. The new ruling has facilitated the opening of a mechanism for the three above banks to pay dividends in shares.

In late 2020, VietinBank planned a 28.8% stock dividend to increase the share capital, but this plan has not been implemented.

To date, all three banks have continued to work out their plans for huge share dividend payment. And, the outlook is open.

Specifically, at its General Shareholders Meeting on April 23, in response to shareholders, Vietcombank General Director Pham Quang Dung said that share dividend payment was in principle approved by all competent authorities, indicating the plan will be executed as soon as possible.

Source: Vietnam Business Forum