Banks pay shares instead of dividends, raising controversy

VietNamNet Bridge - Many banks have said they will pay dividends in shares instead of cash, causing concern among investors. 


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At a shareholders’ meeting on April 10, ACB’s shareholders heard that the bank will pay a dividend of 10 percent in shares for both 2016 and 2017. 

VP Bank shareholders’ meeting on the same day announced the dividend payment of 32 percent in shares. Meanwhile, Bac A Bank also plans to pay 8 percent of dividends in shares.

Only a few banks plan to pay dividends in cash. Of the dividend of 10 percent LienViet Post Bank plans to pay, 4 percent will be paid in cash and 6 percent in shares. 

VIB plans two options, either 5 percent in cash and 39.6 percent in shares, or 100 percent in shares. If the plan is approved, VIB will be the bank to offer the biggest dividends.

Meanwhile, some banks decided not to pay dividends. Techcombank, for example, has not paid dividends to shareholders since 2010. Eximbank’s report showed that it is still incurring the accumulated loss of VND463.109 million, so it won’t pay dividends, according to the bank’s charter.

The policy on dividends pursued by banks for many years has resulted in prolonged arguments between shareholders and banks’ board of directors.

The policy on dividends pursued by banks for many years has resulted in prolonged arguments between shareholders and banks’ board of directors.

In 2016, the Ministry of Finance, a big shareholder of two banks – BIDV and VietinBank – sent a document to banks asking them to pay dividends in cash. After a lot of arguments, the banks had to satisfy the request.

Commercial banks are told to make provisions against risks before paying dividends or bonuses to workers. As such, it is impossible for banks which are facing high bad debt ratios and making high provisions, including provisions for VAMC special bonds, to pay dividends in cash.

Even the banks which make high profits also want to pay dividends in shares to improve their financial capability. The banks want to increase the regulatory capital to be able to expand lending. 

The proportion of short-term capital which can be used for long-term lending has been cut to 50 percent since the beginning of the year, while it would be cut further to 40 percent by early 2018.

Banks don’t want to pay dividends in cash because they want to have more money to implement investment plans – upgrading information technology systems, improving material facilities, expanding networks and the risk management system.

However, despite legitimate aspirations, shareholders were not satisfied about the plans. Analysts warn that once bank shares become less attractive, it would be difficult for banks to increase their charter capital by issuing additional shares.


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