Shareholders unhappy with lower, unpaid dividends

May 6th at 16:25

06-05-2014 16:25:32+07:00

Shareholders in many banks have not received their dividends in recent years though banks have set low rates, but not cut them completely.

Ho Chi Minh City-based Southern Bank has yet to pay shareholders their 2012 dividends, set at 2.5 per cent.

The bank’s general shareholder meeting (GSM) last year approved a 5 per cent dividend for the year, but no payments have yet been made.

At the bank’s recent 2014 GSM, many shareholders voiced discontent that they have received no dividend payments for the last three years, though the bank has continued to set payout targets and has continued to post profits.

Responding as to why Southern Bank hasn’t released dividend payments, chairman Mac Thieu Duc explained the bank had put a significant amount into provisioning on the back of continuing economic difficulties and surging bad debts.

This put a significant dent in the bank’s pre-tax profits, which stood at only VND18 billion ($857,000) last year. Management therefore asked shareholder approval not to pay 2013 dividends to retain undistributed profit for use in business activities.

It is highly suspect though, that while the shareholders have received no dividends, the Board of Directors asked them to approve a payment of VND14 billion ($777,000), 80 per cent of pre-tax profits, to remunerate management and the supervisory board for last year while last year’s GSM only approved 3 per cent of total pre-tax profits to remunerate leaders.

By the end of 2013, the bank’s bad debts were reported at VND1.6 trillion ($76.2 million) with VND1 trillion ($47.6 million) classified as irrevocable.

Another, Navibank, has similarly not paid out dividends to shareholders over the last two years.

In 2012 the bank posted pre-tax profits just under VND3.5 billion ($166,000). Its bad debts surpassed 6 per cent and irrevocable debts amounted to around VND500 billion ($23.8 million).

Last year Navibank reported VND23.9 billion ($1.1 million) in pre-tax profits and kept bad debts to 6.07 per cent.

Also, the bank sold VND768 billion ($36.5 million) to state-owned Vietnam Asset Management Company (VAMC), but still has not announced plans to pay out dividends to shareholders.

Meanwhile, the payout ratio of major player Eximbank slid significantly last year.

Instead of the 10-12 per cent initially targeted, shareholders only got 4 per cent dividends as the bank only achieved 25 per cent of last year’s profit target.

This year the bank expects full-year pre-tax profits of VND1.8 trillion ($85.7 million) with an estimated dividend ratio of 8.5 per cent.

Last year ACB posted VND1.03 trillion ($49.2 million) in pre-tax profits and got shareholder approval for a 7 per cent dividend payout totalling VND645 billion ($30.7 million).

The bank’s shareholders were reportedly dissatisfied with the 7 per cent as ACB has regularly offered much higher dividend rates in the past.

ACB chairman Tran Hung Huy attributed the low dividend payout to lower than expected profits last year.

At Nam A Bank’s 2014 GSM in late March, Nguyen Thi Xuan Loan, former chairwoman of the bank said, they will pay a 2013 dividend of 7 per cent to shareholders. Last year the bank advanced 3 per cent dividend to its shareholders.

The bank plans the 2014 dividend to be around the same rate. As explained by Loan, given the difficulties facing the banking sector, a 7 per cent dividend is fair particularly due to low credit growth in recent years, high provision requirements and below expected profits.

vir