Saturday, February 22 2020

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Investors lose interest in SHB shares for non cash dividend policy, high NPLs

Update: February, 11/2020 - 07:40

 

A SHB office. The bank shares fell 4.2 per cent to end Monday at VNĐ6,800 per share. - Photo congthuong.vn

HÀ NỘI – Sài Gòn-Hà Nội Joint Stock Commercial Bank (SHB) is among the banks that have seen their shares trade below the average value of VNĐ10,000.

SHB shares (HNX: SHB) slumped 4.2 per cent to end Monday at VNĐ6,800 per share.

SHB shares have been below par for most of the time since its debut in April, 2009.

The factors drawing investors into one company’s stock are the consistency of dividend payments and business performance.

SHB shareholders have not been paid any cash dividend since 2014, when the bank decided to pay a 7.5 per cent cash dividend to shareholders.

Since then, the bank has issued bonus shares to pay dividends despite improved results year after year.

At its annual shareholder meeting last April, the bank was questioned when it would pay cash dividends, and again the bank declined.

The merger with Habubank in 2012 had increased SHB’s total non-performing loans or bad debts, so the bank had had to increase the risk provision, the bank’s management board said at the meeting.

The bank had also sold a number of bad debts to the Vietnam Asset Management Co (VAMC) for VAMC bonds that were expected to mature after eight years.

Under the central bank’s regulation, a financial institution that has VAMC bonds with more than a five-year term is unable to pay cash dividends.

On the last days of 2019, local media reported the State Bank of Vietnam had granted permission for SHB to issue bonus shares as 2017 and 2018 dividends at the rate of 20.9 per cent.

The bank plans to issue more than 251.4 million bonus shares to pay dividends for 2017 and 2018. The issuance will help increase the bank’s charter capital to VNĐ14.55 trillion from VNĐ12.03 trillion so that the bank can meet Basel II standards in the first quarter of 2020.

As local banks and financial firms are on the way to meet Basel II standards, SHB may not re-start paying cash dividend soon.

“SHB needs to put capital increase as a top-priority so the bank’s development is sustainable and up-to-date,” the bank said in the 2019 annual shareholder meeting resolution.

The quality of assets is also another reason that has concerned investors when they look at SHB shares.

In 2019, SHB reported a pre-tax profit of more than VNĐ3 trillion, up 47-166 per cent from the figures made in 2016-18.

But risk provision soared 66 per cent year-on-year to almost VNĐ2.37 trillion. Half of the full-year risk provision was made in the fourth quarter of 2019.

The bank’s total asset was up 13 per cent compared to the previous year to VNĐ365.6 trillion with liabilities increasing by 60 per cent to VNĐ12.77 trillion.

Of the liabilities, potential non-collectible debts were nearly VNĐ3.5 trillion. The figure fell 11 per cent year-on-year.

SHB is among the six commercial banks with the highest amount and percentage of bad debts. In 2019, bad debt ratio at SHB dropped to 1.83 per cent from 2.39 per cent.

Other banks whose share prices are also below VNĐ10,000 per share are LienVietPostBank (UPCoM: LPB) and the National Citizen Commercial Joint Stock Bank (HNX: NVB). – VNS

 

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