Banks race to issue dividends in search for growth

As part of their 2025 business plans and preparations for shareholder meetings in April, several banks in Vietnam plan to issue stock dividends at record-high rates of 15-35 per cent.

For state-owned listed banks, VietinBank’s board of directors has proposed using its entire remaining 2023 profit, amounting to over $500 million, for stock dividends.

Vietcombank is planning to issue shares to pay dividends at 18-20 per cent while also seeking additional capital from foreign investors. On March 13, the bank finalised its shareholder list for stock dividend distribution. Accordingly, Vietcombank intends to issue over 2.76 billion new shares.

Similarly, BIDV has announced plans to distribute stock dividends at approximately 20 per cent while also increasing capital to comply with Basel III standards.

Deputy CEO Do Bao Ngoc of CSI Vietnam Construction Securities noted that record stock dividends and capital hikes this season signal banks’ push to bolster finances, expand operations, meet Basel standards, and seize growth opportunities.

“With the government and the State Bank of Vietnam imposing strict caps on deposit rates, commercial banks are compelled to seek alternative funding sources such as share issuances, bond offerings, or international borrowing to meet the minimum 16 per cent credit growth target set for 2025,” she noted.

With a projected 10 per cent increase in 2024 pre-tax profit, reaching approximately $1.15 billion, MBBank expects to distribute dividends at 25-30 per cent.

VPBank, in addition to paying high dividends, is also planning further issuances to raise capital, expand its retail banking, and strengthen its consumer finance segment.

HDBank anticipates a 30 per cent dividend payout, including up to 15 per cent in cash, while Nam A Bank has proposed a 25 per cent dividend distribution for 2025.

In shareholder meeting documents, ambitious profit targets have become a focal point, with some institutions setting aggressive goals while others remain more cautious.

Eximbank aims for a consolidated pre-tax profit of $223 million in 2025, marking a 33.2 per cent increase from 2024. VIB’s board has set a 2025 pre-tax profit target of $441 million, reflecting 22 per cent growth from the previous year.

HDBank, following its restructuring of Vikki Bank, plans to expand small business and individual banking services in second-tier cities and rural areas - markets with high potential and lower risk. Its 2025 pre-tax profit target is set at $800 million, a 25 per cent increase from 2024.

State-owned commercial banks have adopted more conservative growth targets. Vietcombank aims for a 5 per cent increase in pre-tax profit to $1.77 billion, with credit growth of 16.28 per cent. BIDV has set a goal for a 6-10 per cent increase in standalone bank pre-tax profit in 2025.

Economic expert Dr. Le Xuan Nghia highlighted that the unprecedented 15-35 per cent stock dividend distribution plans suggest that while these reported profits appear strong, cash flow remains a concern.

“Banks opting for stock dividends are essentially encouraging shareholders to reinvest directly in the bank. This approach enables them to address cash flow constraints while increasing capital without issuing new shares for Tier 1 capital or corporate bonds for Tier 2 expansion.”

Nghia explained that smaller banks, with limited current account savings account (CASA) deposits, face higher capital costs, forcing them to offer elevated deposit and lending rates to draw in customers. Meanwhile, larger banks leverage their strong reputations, vast client networks, and substantial CASA inflows from major corporations to secure lower-cost funding.

“The core clientele of smaller banks and businesses are struggling amid a sluggish domestic market and real estate recovery, leading to declining credit revenue and shrinking profits,” he said. “Consumer lending is also slowing as weaker purchasing power and cautious spending take hold. Moreover, many lack resources to develop non-credit revenue streams like forex trading, corporate bonds, or securities investment, making them overly reliant on lending.”

In its March 14 banking sector report, MB Securities lowered its 2025 profit growth forecast from 20.2 to 17.7 per cent, citing concerns over high provisioning requirements. MBS expects net profit growth of 19.8 per cent for private banks and 14.7 per cent for state-owned banks.

“While a slight increase in net interest margin and credit growth meeting targets suggest overall banking profit growth of 10-20 per cent in 2025, differentiation is expected. State-owned banks are projected to achieve 12 per cent profit growth, while dynamic private banks could see up to 20 per cent. Meanwhile, smaller banks are likely to experience modest profit increases of around 8 per cent,” the report said.

Banks adjust to balance and cut costs With simultaneous interest rate cuts and accelerated credit disbursement, banks are fuelling Vietnam’s economic breakthrough, driving towards the ambitious targets of 8 per cent GDP growth and 16 per cent credit expansion this year.

Banks cut rates to boost business According to the Monetary Policy Department under the State Bank of Vietnam (SBV), 23 different commercial banks adjusted their interest rates between February 25 and March 18.

MB, HDBank, and VPBank to lift foreign ownership limit A new governmental decree covering the purchasing of shares in Vietnamese credit institutions by foreign investors has increased the ability of some commercial banks to seek more investment from overseas.