Banks are "busy" to pay "paper" dividends: Who loses, who benefits?

Many banks plan to pay dividends at a higher rate than last year to shareholders. Source: Internet.

High dividend payout

This year's General Meeting of Shareholders season comes earlier than last year because the economy has opened up again. But according to the recent direction of the State Bank (SBV), commercial banks should not pay cash dividends in 2022 in order to focus all resources to reduce lending interest rates to support and accompany businesses and people overcome difficulties. This is the second year that shareholders of banks can only receive "paper dividends" under the direction of the management agency.

Therefore, many banks have closed the plan and are expected to offer a high dividend rate, even higher than in 2021.

At the recent General Meeting of Shareholders, ACB shareholders approved the plan to pay a dividend at the rate of 25% in shares. VIB's General Meeting of Shareholders also approved the plan to raise charter capital to over VND21,000 billion, in which the bank will distribute bonus shares of 35% to existing shareholders and 0.7% to employees from equity.

According to documents prepared for the General Meeting of Shareholders, the Board of Directors of MSB plans to submit to the General Meeting of Shareholders a plan to increase charter capital from VND15,275 billion to VND19,857.5 billion from the issuance of more than 458.25 million shares to pay dividends in 2021, equivalent to VND19,857.5 billion, corresponding to a division ratio of 30%.

In addition, this bank also submitted to shareholders for approval a plan to issue up to 14.25 million bonus shares for employees (ESOP).

MB will also issue 755.6 million shares to pay a 20% stock dividend and offer 65 million shares privately to raise capital by more than VND8,206 billion. SHB continues to plan to pay dividends in 2021 in shares with the minimum rate of 15%. OCB also plans to maintain a dividend of 20-25% for shareholders.

With the state-owned bank, at the next meeting, Vietcombank will submit a plan to increase its charter capital in 2022. Earlier this year, this bank completed the issuance of more than 1.02 billion shares to pay dividends from the remaining profit in 2019 at the rate of 27.6%. After the issuance, the charter capital increased to more than VND47,300 billion. Meanwhile, BIDV has just completed paying a stock dividend at the rate of 25.7%, raising its charter capital to VND50,585 billion. BIDV plans to issue 341.5 million new shares, equivalent to 8.5% of charter capital through public offering or private placement, but this has not yet been implemented.

"Dual" benefit

According to experts, there are many reasons why banks prefer to pay dividends in shares, in addition to the banks responding to the call of the SBV, this also helps banks increase capital to increase competitiveness, which is also a necessary condition to ensure the credit supply capacity of banks.

Currently, most banks' income still comes from credit. In order to maintain the capital adequacy ratio at the current level, with a credit growth rate of 14% in 2022, banks' equity will increase by at least around 7-8%.

Moreover, for shareholders, receiving stock dividends is not a loss but also a double benefit because bank shares are still known as "king shares". Analysts are still very optimistic about the growth of the banking industry, which will create strong growth room for banking stocks.

Currently, a series of banks have revealed their business plans for 2022 with many ambitious numbers. VIB is expected to achieve a record profit of VND10,500 billion, up 31% compared to 2021; MSB expects the profit in 2022 to reach VND6,800 billion, equivalent to a growth rate of 30%; MB targets pre-tax profit of VND20,300 billion, up 23% 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, higher than the 13% growth of the 96 companies covered by SSI. In particular, state-owned joint stock commercial banks are estimated to grow their profits by 19%, while other joint-stock commercial banks can achieve 22% growth compared to 2021 due to brighter credit growth prospects.

Pham Thuy Duong, Deputy Director of the Analysis Department, Dragon Capital, said that this foreign fund is allocating investment to the banking sector higher than the proportion of banks in the VN-Index basket due to its confidence in the growth potential of this industry group. According to an investor's calculation, if the bank pays a dividend of 25% in cash, an investor who owns 10,000 shares (with a par value of VND10,000/share) will only receive VND25 million, while if the dividend is paid in shares, the investor has an additional 2,500 shares.

However, according to one expert, a stock dividend will be beneficial for medium and long-term investors, but "surfing" investors will not like this because the stock risk is diluted, the stock price is immediately corrected.

In addition, with the ESOP bonus, most who benefit are a few senior staff or they have to stick with the bank for a long time.