Banks to issue billions of shares to pay dividends for the rest of 2022

A VPBank office in Hà Nội. VPBank will issue a maximum of 2.23 billion shares to increase its charter capital from VNĐ45.05 trillion to VNĐ67.43 trillion in the third quarter of 2022. VNA/VNS Photo

Many banks are completing final procedures to issue billions of shares to pay pidends in the remaining months of this year.

After the State Bank of Vietnam (SBV) approved VPBank to increase charter capital in the form of share issuance from the equity source, the bank will issue a maximum of 2.23 billion shares at the rate of 50 per cent to increase its charter capital from VNĐ45.05 trillion to VNĐ67.43 trillion in the third quarter of 2022.

Previously, Military Bank (MB) announced to close the list of existing shareholders for the share pidend payment on August 23 this year. With more than 3.77 billion outstanding shares, MB is expected to issue an addition of 755.6 million new shares, thereby raising charter capital from the current VNĐ37.7 trillion at present to nearly VNĐ45.34 trillion.

SHB is also expected to issue more than 400 million shares to pay last year’s pidends to shareholders, equivalent to a rate of 15 per cent, in Q3 2022 after submitting to the SBV its charter capital increase plan.

In the first half of August, the SBV approved HDBank to increase charter capital from VNĐ20.27 trillion to VNĐ25.5 trillion by issuing more than 503 million shares to pay pidends in 2021. The additional capital will be taken from the undistributed after-tax profit until the end of 2021.

Meanwhile, MSB said it has submitted to the SBV a charter capital increase plan and is waiting for the SBV’s approval. Accordingly, the bank plans to issue 458.25 million bonus shares to existing shareholders at the rate of 30 per cent and a maximum of 14.25 million ESOP shares.

After eight years of waiting, Eximbank’s shareholders will also receive pidends from the profits retained from 2017 to 2021. Specifically, the bank plans to issue nearly 245.9 million shares to pay pidends at the rate of 20 per cent in Q3 2022.

Many other private joint stock banks also have plans to issue hundreds of million shares to pay pidends this year such as OCB with the rate of 30 per cent, NamABank with 29 per cent, VietBank with 21 per cent, Kienlongbank with 16 per cent, VietCapitalBank with 15 per cent, LienVietPostBank with 15 per cent, SeABank with 12.7 per cent, VietABank with 11 per cent and ABBank with 10 per cent.

The SBV has so far approved charter capital plans of banks such as NamABank, Kienlongbank, VietBank, VietCapitalBank and OCB.

For the group of State-owned banks including Vietcombank, VietinBank and BIDV, though information has not been published, these banks all expect to pay pidends in shares this year.

Vietcombank has so far approved a plan to issue 856 million ordinary shares at the rate of 18.1 per cent, to pay pidends from the remaining profit in 2019 and 2020.

Shareholders of VietinBank also approved a share pidend payment from the source of undistributed after-tax profit, and a cash pidend payment plan in 2020. Specifically, the bank will issue more than 569 million shares to pay pidends, equivalent to a rate of 11.85 per cent.

Meanwhile, BIDV expected to issue more than 607 million shares to pay pidends for year 2021 from the source of undistributed after-tax profit.

This year, all banks will have to continually pay pidends in shares, instead of cash, according to the SBV’s requirement. Right from the beginning of the year, the SBV’s Governor Nguyễn Thị Hồng issued Directive 01/CT-NHNN on organising the implementation of key tasks of the banking industry in 2022, in which banks are required to not pay pidends in cash in 2022 with an aim to continually reduce lending interest rates. This is the third consecutive year that the SBV has required banks not to pay pidends in cash. In 2021, the SBV also issued a similar directive requiring banks to switch to share pidends. The only exception to paying cash pidends is State-owned banks, including Vietcombank, BIDV, and VietinBank, as required by the State Treasury.

In addition, the issuance of shares also comes from the demand to increase capital at many banks, particularly the group of State-owned banks.

According to Fitch Ratings, low capitalisation levels are likely to remain a credit weakness for Vietnamese banks as rapid loan growth will make it challenging to raise capital adequacy ratios (CARs) in the next two to three years.

Fitch estimates that the banks that are still to become Basel II compliant need only about US$0.6 billion of new capital to meet the local Basel II minimum CAR requirement of 8 per cent before the implementation deadline in January 2023.

However, Fitch calculates the banking system's additional capital needs would rise to as much as $10.7 billion (2.9 per cent of GDP) if banks were to raise their loan-loss reserves to cover potential losses from all problem loans, while simultaneously maintaining average CARs at 10 per cent. State banks drive much of the shortfall, due to their lower capital positions. — VNS