Banks promote dividend payments in shares to raise charter capital

Banks promote dividend payments in shares to raise charter capital

Banks with top profits are planning to pay high dividends.

Customers at a BIDV branch. Photo courtesy of BIDV

Several banks are planning to pay dividends in shares to increase their charter capital in the near future.

Vietcombank announced that March 13 will be the last registration date for the issuance of dividends in shares.

Previously, Vietcombank's board of directors approved the plan to issue shares to pay dividends from remaining after-tax profits at a rate of 49.5 per cent. With nearly 5.6 billion shares in circulation, it is expected that this bank will issue nearly 2.8 billion new shares to pay dividends. After the issuance, Vietcombank's charter capital will increase by nearly VNĐ 27.7 trillion to nearly VNĐ83.6 trillion.

According to Vietcombank, the additional capital is intended to fund business activities, development investment and digital transformation, with an aim of improving financial capacity and ensuring a capital safety ratio (CAR) in line with the Basel III international banking standard.

VietinBank plans to use all remaining profits from 2023, more than VNĐ12.5 trillion, to pay dividends in shares to shareholders.

Similarly, BIDV plans to submit to the bank’s April 4 shareholders' meeting a plan to pay dividends in 2024 at a rate of 20 per cent in shares. Recently, BIDV completed the issuance of nearly 1.2 billion shares to pay dividends to existing shareholders at a rate of 21 per cent, increasing charter capital by VNĐ11.9 trillion to more than VNĐ68.9 trillion.

SHB also made its second dividend payment from 2023 on February 27 at a rate of 11 per cent. The bank plans to issue more than 402 million new shares to increase its charter capital to nearly VNĐ40.7 trillion. This issuance is part of the 2023 dividend payment plan, at a total rate of 16 per cent.

According to SHB, the continuous increase in charter capital is important to help the bank improve its financial capacity, increase competitiveness and meet shareholders' expectations.

Banks with top profits are planning to pay high dividends. In 2024, VietinBank, BIDV, Vietcombank and SHB earned profits of nearly VNĐ31.8 trillion (up 27 per cent), more than VNĐ31.3 trillion (up 14 per cent), over VNĐ42.2 trillion (up 2 per cent) and more than VNĐ11.5 trillion (up 25 per cent), respectively.

Experts say that with a 16 per cent credit growth target set for the entire banking industry this year, the credit growth potential of banks, especially large-scale banks, is very high. 

This requires banks to have a large enough capital buffer to meet the requirements by the State Bank of Vietnam (SBV) for minimum CAR when credit growth is high. Dividend payments in shares will help banks accumulate equity capital, improve CAR and increase the ability to expand credit.

SBV has just announced a draft circular regulating CAR for credit institutions. Under the draft, the CAR will gradually increase from the current 8 per cent to 10.5 per cent in 2033. 

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