Banks pay modest dividends as profits shrink

Banks pay modest dividends as profits shrink

With profits slumping due to bad debts and a huge amount of loan loss provisions, many banks have paid their shareholders modest dividends out of poor 2012 business results.

Around ten banks have held their annual shareholder meetings, during which time attendees were shocked to learn of the poor dividends they were to receive.

Sacombank shareholders, for instance, are expected to receive dividends worth only 6 percent of the total registered capital, which is even lower than the deposit interest rate.

The reason, according to Sacombank, is that the bank had to set aside as much as VND2.05 trillion (US$98.56 million) for loan loss provision, which is a non-cash expense, to account for future losses on loan defaults. Its pre-tax profits in 2012 thus dropped to only VND1.31 trillion, or 39 percent of target, the bank said.

Meanwhile, Techcombank, which used to be among banks that posted the highest profits in recent years, only reported a VND1.01 trillion pre-tax profit in 2012. With the figure only 41 percent of the 2011 result, Techcombank decided not to pay dividends to shareholders.

The decision was approved in the meeting on April 13, as shareholders and chiefs all agreed that profits would be used to boost the bank’s development.

ACB shareholders are expected to receive a 6.85 percent dividend each, while the figure last year was 20 percent.

The situation is brighter for shareholders of the state-owned commercial banks.

Vietcombank’s dividend rate is at 12 percent, even though the bank could only reach 88 percent of its profit target. BIDV’s dividend payment is of a 10.8 percent rate.

Smaller banks meanwhile had to pay different dividend rates to please their small shareholders.

Nam A Bank, for instance, paid 9 percent dividends to shareholders who own less than VND10 billion worth of shares, while those with larger shares received a 4.47 percent dividends each.

Bank stocks less attractive

With negative information about banks’ business results and profits repeatedly announced, many securities investors commented that bank stocks have become far less attractive to investors.

“I used to own bank stocks but pay no attention to them now as there is no potential in the banking sector,” said Dang Hoang Phuc, a stock investor in Ho Chi Minh City.

“Dividends from bank stocks are way lower than those of other businesses operating in the consumer goods or technology industries,” he added.

Securities firms also posted a gloomy forecast for the banking stock market this year.

Banks’ profits in 2013 will remain less positive than previous years, with non-performing loans the main culprits, according to analysts at Phuong Nam Securities Corporation.

“Investors thus should carefully consider before investing in bank stocks,” the company advised.

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