Shareholders expect the shareholder meeting season

Bank stocks always attract shareholders due to favorable business information. Photo: MB's 2023 AGM

Expectations for dividend distribution and capital increase

According to information disclosed by some banks, experts and shareholders are expecting plans for cash dividend distribution after many years of being unable to distribute cash dividends due to the need for additional capital to meet Basel II criteria and requirements of the State Bank of Vietnam (SBV).

In late January, at a meeting with investors, representatives of Techcombank's leadership revealed information about plans to distribute dividends after 10 years of retaining all profits for reinvestment. Accordingly, the bank plans to propose to the AGM a plan to distribute annual cash dividends by allocating at least 20% of total profits - equivalent to 4-5% of Techcombank's equity at the beginning of the year, estimated at VND1,500 per share for 2024. Techcombank representatives said that maintaining the policy of annual cash dividend payment while continuing to keep high business growth above the industry average and ensuring a capital adequacy ratio (CAR) of 14-15% was entirely feasible.

Recently, VIB has allocated over VND1,500 billion in interim cash dividends for 2023 to existing shareholders at a rate of 6%. For VPBank, at the 2023 AGM, the bank's leadership shared plans to distribute cash dividends for five years starting from 2023 because with the current capital base, VPBank is capable of maintaining and allocating 30% of annual profits to distribute cash to shareholders. Therefore, it is highly likely that VPBank will continue to propose a cash dividend distribution policy this year. Additionally, some other banks have distributed part of their cash dividends in 2023 such as ACB, HDBank, and MB.

However, there are still banks distributing dividends in the form of shares to increase capital. PG Bank has finalized the list of shareholders to issue bonus shares at a ratio of 10:4 (owning 10 shares will receive four bonus shares). The source of share issuance capital is taken from accumulated profits and additional reserve funds for charter capital according to the bank's financial report for 2022. If successful, PG Bank's charter capital will increase from VND3,000 billion to VND4,200 billion. This is the first time PG Bank has increased its capital in nearly 13 years and also the first time this bank has distributed bonus shares in nearly 12 years.

In Nam A Bank, along with transferring NAB shares from UPCoM to HoSE on March 8 to increase liquidity, and diversify shareholder structure, the bank also plans to maintain a 20% dividend in shares to increase capital, and enhance financial capacity, competitiveness, and shareholder interests.

LPBank's Board of Directors plans to present a proposal to issue shares in 2024 to increase their charter capital. In 2023, the bank's charter capital increased by 47% (equivalent to VND8,285 billion) to VND25,576 billion. It is worth noting that since 2018, LPBank has diligently increased its large-scale charter capital by 20-47% annually through various forms, mainly by distributing bonus shares and offering shares for sale to shareholders.

Furthermore, some banks have planned to increase capital through share issuance. Vietcombank plans to privately issue shares equivalent to 6.5% of the charter capital before implementation to institutional investors. BIDV also plans to privately issue shares equivalent to 9% of the charter capital. MB continues to carry out a plan to issue 70 million shares (1.3% of the shares before implementation) to the Military Telecommunications Group. Simultaneously, many banks also plan to issue shares to foreign investors.

Better profit targets

Along with the benefits received, shareholders also pay attention to the business results of banks. Because the better the business results, the more the value of the shares is consolidated.

With the profit champion in 2023, "big player" Vietcombank sets a profit target increase of 10% in 2024. The other three state-owned banks still leave this goal open. As for the group of private joint stock commercial banks, some banks set double-digit growth targets, but some banks are "modest". Among them, the breakthrough ambition must be mentioned to Eximbank with a growth target of over 90%, to VND5,180 billion in pre-tax profit in 2024. HDBank and VPBank set profit growth targets above 20%. MB expects profits to reach over VND28,800 billion, up 10% compared to 2023.

Banking profits are positively evaluated by Vietcombank Securities Company this year when it forecasts a growth rate of about 10% but there will be strong differentiation, some banks in the small-scale group will continue to slow down, even negative growth. According to experts, the economy is expected to recover better this year, capital demand will increase from the second quarter, so banking profits will be better. Factors affecting banking profit growth in 2024 include recovering net interest margins, higher credit growth, and the low-interest rate environment established in 2023.

However, along with the achievements, shareholders are also concerned about the bad debt situation, because in 2023, most banks faced the situation of increasing bad debts both in value and ratio to total outstanding loans. This has led banks to increase their provisions for risk reserves, affecting profit results. Therefore, in 2024, if the bad debt situation persists, especially when the coverage ratio of bad debts decreases, and Circular 02/2023/TT-NHNN is about to expire, then the financial and business picture of banks will face many pressures.