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Bank shareholders raise concerns over dividends

Update: April, 28/2012 - 08:44

HA NOI — Military Bank (MBB) shareholders disagreed over dividend payments and preferences for strategic partners during the bank's general shareholders meeting on Thursday.

Regarding a proposed dividend payment plan, some shareholders wanted the bank to pay in shares to help them avoid a 5-per-cent income tax, but bank vice president Le Van Be said that cash dividends remained a priority.

"It helps shareholders get cash to take advantage of other investment opportunities, while payment by shares takes time and directly affects the interests of shareholders," Be said.

Other shareholders argued that the 15-per-cent dividend rate was too low and pushed for the rate to be lifted to 18 per cent. At that amount, many claimed, the bank could still retain profits of over VND700 billion (US$33.3 million).

Bank management agreed to revise the proposal to provide for a cash dividend of 17 per cent.

Military Bank also plans to increase its charter capital from VND10 trillion ($476 million) to VND13 trillion ($619 million). To raise capital, it will offer 62.5 million shares worth VND625 billion ($29.7 million) in the third quarter of this year, with 237.5 million shares worth nearly VND2.4 trillion ($114.2 million) to be offered to strategic partners in the second phase.

The offer price to domestic strategic partners would be negotiated at 25 per cent below market price but in no event less than par value. The price for foreign strategic partners would be negotiated at an appropriate margin.

However, shareholders said that these terms were too excessive and that other banks, such as Vietcombank and Vietinbank, often offered shares to strategic partners at 15 per cent or more above market price.

But Be argued that the terms were necessary to lure investors.

"They have so many opportunities to choose from elsewhere in the market, if we don't offer these incentives, we lose," he said.

Military Bank also planned to issue VND4 trillion ($190.4 million) worth of five-year convertible bonds at a yield of 5 per cent per year, but a number of shareholders argued this was too low.

Be countered that "the success of the bond issue will solve a lot of problems, including the size of assets and the bank's bad debt and prudential ratios."

Military Bank is the 10th leading share by capitalisation on the HCM City Stock Exchange. — VNS

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