Vietcombank intends to utilize all remaining 2023 profits, exceeding 22.77 trillion VND (approximately 891 million USD), to issue dividends in the form of shares. This issuance, at a remarkable 49.5% ratio, will increase the bank’s charter capital from 55.89 trillion VND to 83.56 trillion VND. It marks the highest dividend payout rate in Vietcombank’s history, surpassing the 35% issued in 2016. Meanwhile, VietinBank proposes to boost its charter capital from 53.7 trillion VND to 77.67 trillion VND by issuing up to 2.4 billion shares, representing a 44.64% ratio.
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| Image caption: A customer at a Vietcombank office in Thanh Xuan district, Hanoi. (Photo: VNA) |
VietinBank’s plan, upon approval, will utilize retained earnings, reserves, and past cash dividends from 2009 to 2016. BIDV is set to issue 123.8 million shares through a private placement to professional investors in Q1/2025, with a share price of 38,800 VND, aiming to raise over 4.8 trillion VND. If successful, BIDV’s charter capital will surpass 70.2 trillion VND. Additionally, MB (Military Bank) intends to issue nearly 796 million shares, representing a 15% stock dividend, which will increase its charter capital from 53.06 trillion VND to 61.02 trillion VND.
MB will also privately issue 62 million shares to raise an additional 620 billion VND. SHB (Saigon-Hanoi Bank) has announced an 11% stock dividend from 2023 profits, resulting in a charter capital of 40.66 trillion VND. Nam A Bank, on the other hand, plans to issue over 343 million shares, representing a 25% stock dividend. This move will raise 4.28 trillion VND and increase its charter capital from 13.73 trillion VND to 18 trillion VND.
Stock dividends are gaining preference over cash payouts among banks, as they enable the retention of funds for technology investments, credit expansion, and capital adequacy improvements. This strategy aligns with the State Bank of Vietnam’s (SBV) guidance on capital reinforcement to fortify the financial system.
Navigating Increasing Pressure
Banks are focused on enhancing their capital adequacy ratio (CAR), a critical indicator of risk resilience, as they work towards full compliance with Basel III standards. These standards mandate higher capital buffers to safeguard against potential economic shocks. By increasing their charter capital, banks can expand their lending limits, credit offerings, and capacity to finance large-scale projects.
Experts emphasize that capital expansion is crucial in the context of fierce domestic competition and the growing presence of foreign financial institutions. It enhances the bank’s credibility, market position, and ability to invest in technology and services. Issuing stock dividends also allows banks to preserve cash flow for reinvestment while delivering value to shareholders through increased shareholdings. This strategy is particularly vital for maintaining liquidity during the economic recovery phase.
Phan Duc Tu, Chairman of BIDV, underscored the importance of state-owned banks strengthening their financial position to support the economy effectively. With a projected credit growth target of 16%, commercial banks must proportionally expand their equity base. “This creates a significant challenge for commercial banks to balance sustaining rapid economic growth while adhering to global regulatory standards,” he added.
Economist Dr. Can Van Luc noted that despite Vietnam’s aggressive capital-raising efforts, the country’s CAR remains below regional averages. Increasing charter capital is not only essential for Basel III compliance but also for effective risk management and financial resilience. Dr. Nguyen Huu Huan, from the University of Economics in Ho Chi Minh City, emphasized that capital increases are crucial for managing the rising non-performing loans (NPLs) in the banking sector. By retaining earnings for equity growth, banks can optimize returns for shareholders, especially given the recent surge in bank stock prices.
