The Ministry of Finance wants Bank for Investment and Development of Vietnam (BIDV) and Vietnam Bank for Industry and Trade (VietinBank) to pay 2015 dividends in cash.

Customers transact with Bank for Investment and Development of Vietnam (BIDV). The Ministry of Finance wants Bank for Investment and Development of Vietnam (BIDV) and Vietnam Bank for Industry and Trade (VietinBank) to pay 2015 dividends in cash.

The ministry has written to the State Bank of Vietnam (SBV) proposing the central bank tell representatives of the State stakes in the two commercial banks to push for payments of cash dividends.

In Document 6854/BTC-TCT dated May 19 sent to the SBV, the ministry suggested that dividends for the State stakes go to the State budget.

The document cited Clause 5 of Article 23 in Decree 57/2012/ND-CP dated July 20, 2012 on finances at credit institutions as stipulating that at commercial banks over 50% owned by the State, representatives of the State there must consult the SBV and the Ministry of Finance over how to distribute retained profit, and shareholders’ opinions must be sought over this matter at general meetings as well.  

BIDV and VietinBank held shareholder meetings in April. VietinBank shareholders approved a plan not to pay a 2015 dividend while BIDV shareholders agreed to get a share dividend of 8.5% for last year.

According to the Enterprise Law, general meetings can decide on crucial plans of businesses. Therefore, BIDV and VietinBank will have to hold general meetings again to ask shareholders for approval of dividend payments.

The two banks can issue shares to increase their chartered capital but market conditions are not ripe for share issuances now, according to the Finance Ministry. Therefore, shareholders decided to refrain from taking a cash or share dividend.

Last year, BIDV paid a cash dividend of 10.2% for fiscal 2014, with around VND3 trillion going to the State budget. Meanwhile, VietinBank paid a cash dividend of 10%, so the State got around VND2.4 trillion.

According to the Finance Ministry, the National Assembly issued Resolution No. 99 on November 11, 2015 setting a target of obtaining VND55 trillion from retained profits and dividends that are paid to representatives of the State stakes at businesses this year.  

Speaking to the Daily, a central bank leader said the central bank will seek the Prime Minister’s view on the Finance Ministry’s proposal. If the Prime Minister gives the go-ahead, the central bank would order representatives of the State-held shares at VietinBank and BIDV to push for cash dividend payments for 2015.

A representative of BIDV told the Daily that it would be costly to hold a shareholder meeting. He underscored the need to raise owner’s equity to meet requirements for the capital adequacy ratio (CAR) and the Basel Capital Accord II (Basel II) which Vietnam will have to obey in line with international practices. Therefore, it is necessary to retain profit to supplement equity.  

VietinBank said it did not pay a 2015 dividend to strengthen its financial position in line with its development strategy and international practices and to meet the CAR requirement. VietinBank’s consolidated profit exceeded VND3.66 trillion last year.    

The central bank leader told the Daily that the central bank allowed the two banks to retain profit, so that they can increase their CARs, and take over ailing banks.  

If BIDV and VietinBank pay cash dividends, shareholders including representatives of the State stakes would have to add capital to increase capital of the two institutions.