Profit of thousands of billions, paying cash dividends is still a difficulty for banks

Pending approval

In fact, paying dividends in cash is not something that banks can do as they wish. Some banks need to retain profits to increase their charter capital, in order to increase competitiveness. Some banks are in the restructuring phase and are not yet allowed to pay dividends. Or the Big4 group that wants to pay dividends must wait for the opinion of the competent authority.

Vietcombank's 2023 Annual General Meeting of Shareholders (AGM) approved the 2022 profit distribution plan, by setting aside VND 21,680 billion for dividends.

The Congress authorized the Board of Directors to carry out this work according to the approval document of the State Bank of Vietnam (SBV), and at the same time develop a plan to increase charter capital by issuing shares from the remaining profit of 2022 (valued at VND 21,680 billion) when approved by the SBV.

With the characteristics of a bank in which the State holds a controlling stake, Vietcombank's General Meeting of Shareholders also agreed with the Board of Directors' proposal that the 2023 dividend will also be subject to approval by the competent authority.

Similarly, VietinBank approved the proposal to allocate VND11,521 billion of remaining profit to increase charter capital through stock dividend payment. The decision and implementation of the official 2022 profit distribution plan still have to wait for approval from the competent authority.

At the BIDV Bank General Meeting of Shareholders, shareholders approved the plan to pay dividends in 2022 by issuing shares at a rate of 23%, from undistributed profits in 2022 of about VND 11,634 billion.

BIDV's Board of Directors is authorized to distribute 2022 profits according to the official opinion of the State Bank, ensuring that it does not exceed the maximum rates approved by the General Meeting.

BIDV has not even paid dividends in 2021. The bank plans to issue 642 million shares to pay dividends in 2021 (equivalent to undistributed profits of VND 6,420 billion). The expected payment time is in 2023 after receiving approval from competent authorities.

*Shareholders vote to approve a number of issues at the 2023 General Meeting of Shareholders. (Photo: TCB).*

The many ways of commercial bank dividends

Despite being a large-scale commercial bank, Techcombank is far behind VPBank in terms of charter capital. In order to supplement capital for business operations, Chairman of the Board of Directors Ho Hung Anh convinced shareholders not to receive dividends in 2022.

Accordingly, Techcombank allocated VND32,676 billion from remaining profits of previous years to supplement charter capital.

The remaining profit of VND 23,500 billion is maintained in the form of undistributed profit to serve Techcombank's business operations.

Many banks are slow to pay cash dividends. (Photo: Hoang Ha)

Sacombank’s failure to pay dividends has even been misunderstood, leading to controversy. In response to questions from shareholders about not paying dividends for many years, Sacombank’s leaders explained that the bank is in the process of restructuring and has not yet met the conditions required by regulations to pay dividends.

Some smaller banks were also questioned by shareholders about dividends. At ABBank, in response to the strong reaction of shareholders, Mr. Dao Manh Khang, Chairman of the Board of Directors, said that ABBank needs to accumulate bank profits in the next 3-5 years to increase equity capital, and can issue additional shares to increase new capital when necessary.

ABBank Chairman persuaded shareholders to agree to retain profits to reserve resources for long-term investment in people, technology systems and data.

“We retain profits to invest in systems, invest in people, and make long-term investments in technology so that we can have a breakthrough in profits,” Mr. Khang said.

At PG Bank, in response to a shareholder's question about the reason for not discussing the dividend plan, Mr. Nguyen Quang Dinh, Chairman of the Board of Directors at that time, said that the dividend payment still had to wait for the opinions of new shareholders.

It is expected that by the end of May, the group of shareholders buying shares from Petrolimex will complete the procedures for official launch.

Many years without paying cash dividends, there are companies with huge profits of billions, but there are also many businesses facing difficulties and constant cash flow shortages.

Source