Annual General Meeting of Shareholders (AGM) season of the banking sector: Excited about dividends, finding strategic investors

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The State Bank said that it has directed banks not to pay dividends in cash to focus resources on supporting people and businesses to reduce interest rates.

Attractive dividend

According to the AGM document on April 29, 2022, BIDV plans to issue a maximum of nearly 1,037 billion shares to pay dividends to shareholders, equivalent to a rate of 25.77%. After the issuance, BIDV's charter capital will increase from VND40,220 billion to more than VND50,585 billion.

Phan Duc Tu, Chairman of BIDV's Board of Directors, said that the bank expects the additional capital to be used to invest in facilities and technology infrastructure, develop new products and services, and enhance the application of information technology, increase the ratio of non-interest income and improve risk management. BIDV will also focus on restructuring the credit portfolio and retail.

Vietcombank has announced that it will hold the 2022 Annual General Meeting of Shareholders on April 8. According to the plan, this year, Vietcombank will issue more than 1.02 billion shares to pay dividends from the remaining profit in 2019 at the rate of 27.6% (shareholders owning 1,000 shares will receive 276 new shares). After the issuance, the bank's charter capital increased by VND10,236 billion, to more than VND47,325 billion.

At the conference on implementing tasks earlier this year, Mr. Nguyen Thanh Tung, Deputy General Director of Vietcombank, asked the Government and the State Bank of Vietnam (SBV) to create favorable conditions for Vietcombank to continue to increase capital by allowing the bank to retain after-tax profits to pay stock dividends. At the same time, there is a roadmap to increase the foreign ownership limit, which is to increase to 35% in the immediate future.

A number of other banks such as VIB, ACB, MSB, OCB and SHB plan to pay dividends in 2021 by shares with the ratio of 15-30%. MSB leaders said that the bank will submit to the General Meeting of Shareholders the dividend in 2021 at the rate of 30% in shares, thereby increasing charter capital. The bank wants the capital adequacy ratio to be higher than the common standard, but still ensure efficient use of capital.

In recent years, banks have chosen to issue stock dividends instead of cash, because this helps to increase charter capital and improve the capital adequacy ratio. Thereby, banks have a better credit growth room, but at the same time, it is also the second year to meet the SBV's request to reduce costs to support the economy before the impact of the pandemic. Moreover, for investors, the share price of the "king" of the banking industry still has room to increase thanks to a positive business outlook.

However, there are still many banks that do not pay dividends to save profits for capital and business growth plans. For example, Eximbank has not been able to pay dividends for the past nine years due to internal disputes and has to speed up the handling of bad debts.

Continue to seek strategic investors

In addition to paying high dividends, many banks also plan to expand the foreign ownership ratio (foreign room), and look for strategic investors in 2022. Recently, VPBank has adjusted the foreign ownership ratio at the bank from 15% to 17.5% of charter capital.

At a recent meeting to discuss business performance and results, VPBank said that the private placement for strategic partners is still on schedule, expected to be completed in the first half of 2022. According to VPBank's leaders in 2022, the bank will continue to strengthen its capital base by looking for strategic investors. The foreign partner is rumored to be Sumitomo Mitsui Banking Corporation (SMBC).

Similarly, MSB leaders also said that for plans related to raising capital, MSB will ask the General Meeting of Shareholders to approve and deploy in 2022. In which, the bank is targeting investment sources from foreign investors and is working with a number of parties to have a specific plan.

At OCB, a representative of this bank also said that it is negotiating with foreign partners to sell the rest, closing the "foreign room" under the regulations below the ceiling of 30%. The important issue is the price, if the two sides can agree, this deal will be completed in the first half of 2022. Sacombank will also sell 32.5% shares to foreign investors after completing the restructuring in 2022.

Currently, many banks have revealed business plans for 2022 with ambitious growth. For example, MSB expects profit in 2022 to reach VND6,800 billion, equivalent to a growth rate of 30%; VIB is expected to achieve a record profit of VND10,500 billion, up by 31% compared to 2021; OCB expects profit growth at 25-30%.

Meanwhile, experts at SSI Research estimate that banks' average pre-tax profit growth in 2022 will be 21% compared to 2021, which is higher than the 13% growth of the 96 companies covered by SSI.

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According to Dang Tran Phuc, Chairman of the Board of Directors of AzFin Vietnam Joint Stock Company, in 2022 there will be no bullish wave for bank stocks, but the information on capital increase, stock dividend, room extension, etc. is expected to help banks increase equity capital, thereby making the capital adequacy ratio (CAR) higher to meet Basel III standards, this will support bank stocks in the medium and long term.