Statistics of more than 20 banks showed that most of them recorded higher accumulated profits compared to the end of 2017, thanks to the higher net profit than the deductions for funds and dividends made in the year.
As having a prosperous business year, the accumulated profit in many banks continued to rise. The 10 banks with the highest retained profits recorded a total value of 85 trillion dong in the end of 2018, up by 49 percent compared to the end of 2017.
In late 2018, the undistributed profit of Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) reached more than 20 trillion dong, significantly up by 130 percent compared to late 2017 and leading the banking system. This result was thanks to the bank’s record high net profit of more than 14.6 trillion dong, along with more than 53 trillion dong of profit retained from the previous year.
After Vietcombank, Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Vietnam Technological and Commercial Joint Stock Bank (Techcombank) and Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) recorded fairly equal accumulated profit of above 12.4 trillion dong.
Previously, in the end of 2017, Techcombank attained the highest undistributed profit in the system with more than 10.997 trillion dong after many years of not paying dividends. By mid-2018, Techcombank had used more than five trillion dong of its after-tax profit and the reserve fund for supplementing charter capital and share premium to distribute dividends at a ratio of up to 200 percent, helping the bank to raise its charter capital by threefold in one go.
In 2018, Techcombank’s net profit was more than 8.4 trillion dong, just behind Vietcombank.
The accumulated profit of Military Commercial Joint Stock Bank (MBBank), Vietnam Prosperity Commercial Joint Stock Bank (VPBank) and Asia Commercial Joint Stock Bank also increased significantly to more than 7.1 trillion dong, 6.1 trillion dong and 5.1 trillion dong, respectively.
Meanwhile, Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) saw a 20 percent decline in accumulated profit, as the bank provisioned for all funds and paid dividends at more than 1.3 trillion dong, while attaining only 960 billion dong of net profit in 2018.
With fairly high accumulated profit supplemented in the past year, the capital raising task of many banks will see positive prospects.
In 2018, the entire banking system was supplemented with more than 63 trillion dong of charter capital. Nevertheless, according to many experts, banks still need more capital because their Capital Adequacy Ratio (CAR) remains low, especially when the application of the Basel II standards is approaching. Thus, charter capital increasing plan will still be one of the main focuses in the annual general meeting season of the banking sector this year.
BIDV and VietinBank are having fairly high accumulated profit (more than 12 trillion dong), and if their dividends are retained, this will be a significant source to increase charter capital which can help ease many immediate difficulties of the two banks. In the past years, BIDV and VietinBank paid dividends in cash at a ratio of about seven to eight percent. This year, the three state-owned banks proposed the government for approval of the plan of not distributing dividends in cash and retaining profits for increasing capital. Compared to other capital raising solutions such as asking for allocation from the state budget or conducting private placement, retaining profits is considered the easiest way.
Many other banks are also planning to retain profits for raising capital this year. Typically, VPBank has recently said that it will retain all of the undistributed profit in 2018 (after deducting funds) of more 3.4 trillion dong to supplement the bank’s capital.
For Nam A Commercial Joint Stock Bank (NamABank), by the end of 2018, the undistributed profit of the bank reached 542 billion dong. The bank said that it will use 536.5 billion dong to pay dividends in shares (at a ratio of 16 percent), thereby increasing its charter capital to nearly 3.9 trillion dong.
Retaining profits is not only for increasing charter capital and supplementing funds, having an abundant source of undistributed profit will also help banks to carry out many other plans. For example, MBBank right from the beginning of the year used more than one trillion dong to acquire more than 43 million treasury shares, and is going to spend 1.2 trillion dong for paying cash dividends to shareholders in the near future.
