Dividends and business plan, the most concerned issues at banks’ shareholder meeting

27-May-2020 Intellasia | Thoi bao Ngan hang | 6:02 AM Print This Post

On May 22, Vietnam Maritime Joint Stock Commercial Bank (MSB) was the first bank that held the general Meeting of Shareholders (GMS). After that, the GMS of Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) took place on May 23, followed by Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) that scheduled the meeting on May 29. The GMS of commercial banks was later than previous years because of the Covid-19 pandemic.

The most concerned issue is dividend distribution; time to go listed; dealing with the capital increase of banks and shareholders must also accept the fact that bank profits will drop sharply in 2020 and the bad debts will grow due to the impact of the pandemic.

Credit institutions announced at the end of the fiscal year 2019, shareholders could be happy when the results of the majority of commercial banks last year were good with high profit growth, and there were even some banks whose profit increased excessively by 20 percent compared to the plan. However, at the request of the State Bank of Vietnam (SBV), commercial banks were not allowed to pay cash dividends to reserve resources to support customers affected by Covid-19. According to VPBank’s documents sent to shareholders before the meeting, undistributed profits and development investment fund at the end of 2019 of the bank was 7.014 quadrillion dong. However, it will retain undistributed profits in the form of retained earnings, and at the same time do not divide bonus stocks from development investment funds, reserve funds to supplement charter capital in order to retain capital for business activities.

It is quite common for shareholders not to receive dividends in the previous GMS. Even as Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), the shareholders have not received dividends for ten consecutive years. At the meeting of MSB, the representative of the major shareholders also bargained: could dividends be shared at five percent (within the expected ten percent dividend of MSB)? Huynh Buu Quang vice Chair of the Board of directors of MSB said “currently, according to the regulations of SBV, when the credit institutions have not fully settled the debts at Vietnam Assets Management Company (VAMC), they are not allowed to pay dividends.” Perhaps this is also the general answer of many other commercial banks on this issue. Resources from undistributed profits of each commercial bank will have different usage plans. And according to Techcombank leaders, investing in banks needs a long-term vision. Swing traders should not spend money on Techcombank. Before talking about stock prices, the investors should focus on the results of what the bank has done.

Regarding the business plan for 2020, MSB still targets high growth: increase assets by eight percent to 170 trillion dong; raise mobilised capital by ten percent to 99 trillion dong; credit by 20 percent to 81.5 trillion dong; and profit before tax to 1.439 trillion dong. Meanwhile, VPBank is modest with the plan: total assets increase by 12.7 percent to 425.132 trillion dong; customer deposits and valuable papers are planned at 299.728 trillion dong; credit balance of 304.744 trillion dong; pre-tax profit of 10.214 trillion dong, down 1.1 percent compared to 2019. Southeast Asia Commercial Joint Stock Bank (SeABank) targets the pre-tax profit in 2020 to reach 1.506 trillion dong, an increase of 8.3 percent compared to the previous year, much lower than the double growth of 2019.

It is inevitable for commercial banks to adjust their growth plan as announced at the end of 2019. Because, the banking system has been implementing a series of policies to support customers with decreasing profits. Moreover, like many other businesses, the banks’ business operations are also negatively affected by the Covid-19 pandemic. The commercial banks are prepared to increase the bad debts, but their goal is still to control the bad debt ratio below three percent in order to minimise the negative impact on their business activities in the following years.

According to the Project of Restructuring the stock market until 2020 and orientation to 2025, by the end of 2020, all commercial banks will have to list and register for transactions on the Unlisted Public Company Market (UPCoM). Currently, there are 13 commercial banks that have not done this. At the end of 2019, MSB applied to go to Hochiminh Stock Exchange (HOSE), but the pandemic broke out, causing MSB to postpone the listing. Not only MSB but also many other commercial banks had to adjust their plans on the stock market. If the situation becomes positive, they will complete this task this year.


Category: Finance, Vietnam

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