Tran Thien Nguyen, who owns shares in a joint stock bank based in HCM City, hopes this year it will pay higher dividends than in previous years.

In recent years banks had been paying very low dividends or even nothing, he said.

As a result, dividend payments have always been a hot topic at lenders’annual shareholders meeting in recent years.

Analysts blame the low dividends on banks’ high bad debt levels and their slow recovery.

The chairman of a HCM City-based bank with a chartered capital of VNĐ5 trillion (US$220 million) said last year pre-tax profits were VNĐ484 billion, or 10 per cent higher than the target.

But it only intends to pay a dividend of around 5 per cent, the same as the 2015 rate.

He explained that the bank had to set aside a considerable amount of money for risk provisioning since the market was still beset by many difficulties.

The banking sector still has non-performing loans worth about VNĐ200 trillion (US$8.8 billion) bought by the Viet Nam Asset Management Company (VAMC) but remaining unresolved.

To settle bad debts, banks are having to use considerable sums of money for their risk provision accounts, which has a big impact on their bottom line.

Eximbank for instance had to set aside VNĐ1.2 trillion last year for provisioning, or 82 per cent of its net interest income. In the event, its pre-tax profit was only VNĐ300 billion.

Therefore, Eximbank’s after-tax profit was only VNĐ202 billion, 70 per cent down from 2015.

VIB Bank’s provisioning was VNĐ532 billion, or 56 per cent of its net interest income.

At the same time banks are also struggling to adopt international bank management standards prescribed under the Basel II accord as required by the central bank.

Basel II requires minimal capital requirements, regulatory supervision and market discipline.

To achieve this goal, banks must increase their capital to meet capital adequacy ratio (CAR) norms. Under Basel II standards, they need to have CAR of around 9 per cent.

State giant BIDV is one of the lenders that would have to mobilise more capital to meet the 9 per cent norm.

VNS