Eximbank delays AGM amid losses

14:13 | 10/05/2016
Eximbank has postponed its annual general meeting to later this month and has reported a remarkable drop in profits for the first quarter of the year.
 

The Ho Chi Minh City-based bank could not hold its annual general meeting (AGM) as scheduled on April 29, as the number of shareholders registered to attend the meeting was below the Eximbank charter minimum requirement of 65 per cent of voting shares.

On the morning of the AGM, the total number of shareholders in attendance was 487, representing just 50 per cent of the total voting stakes.

According to the bank, in accordance with current regulations and the bank’s charter, its new AGM will be held within 30 days of April 29. The exact date and venue will be announced at a later date.

Japan’s Sumitomo Mitsui Banking Corporation, which acquired some 15 per cent of Eximbank’s stakes back in 2007, is currently the bank’s largest shareholder. Other major shareholders include Vietcombank and VinaCapital Vietnam Opportunity Fund (VOF), holding 8.24 per cent and 4.99 per cent of the bank’s stakes, respectively.

Eximbank reported VND40 billion ($1.83 million) in net profit in 2015, a sheer drop of 88 per cent compared to 2014.

At the end of the first quarter in 2016, the bank’s total assets had fallen on-quarter by 2.1 per cent to VND122.22 trillion ($5.61 billion). Its accumulated losses, meanwhile, had reached VND793.5 billion ($36.39 million).

Eximbank’s operating expenses during the period rose roughly 40 per cent, totalling VND662 billion ($30.36 million). The bank’s net operating profit, as a result, settled at only VND368 billion ($16.88 million), a decrease of almost 32 per cent compared to the same quarter last year.

What’s more, Eximbank’s risk provisions in the first quarter soared to VND337 billion ($15.45 million), and thus ate up the lender’s profit. Its pre-tax profit and post-tax profit were recorded at VND30 billion ($1.37 million) and VND24 billion ($1.1 million) respectively, a remarkable drop of 94 per cent compared to the VND415 billion ($19.03 million) in post-tax profit recorded in the first quarter of 2015.

Eximbank explained that the drastic tapering in profits was a result of the lender’s provisions set aside quarterly for credit risk, and risk on special bonds issued by the Vietnam Asset Management Company, on an accumulation basis.

When shareholder rights find no respect

The conflict between shareholders and Eximbank’s Board of Directors is getting out of control, as shareholders can virtually have no say against the board’s decisions.

Helpless shareholders

On April 29, the market stirred when the mounting conflict between Eximbank’s Board of Directors (BOD) and its large shareholder group came to light. The first clash culminated in the annual general meeting (AGM) being postponed due to insufficient participation of shareholders with voting power. As a matter of fact, the number of shareholders showing up at the meeting only accounted for 50.19 per cent of the total voting shares, meaning the remaining 49.81 per cent of shareholders decided to boycott the AGM—a rather hefty percentage for a listed bank of Eximbank’s proportion.

Prior to the AGM, the bank’s BOD received letters from representatives of two domestic shareholder groups, one holding 11.82 and the other 10.42 per cent of the voting shares, requesting Eximbank to elect two additional board members to make up the 11 members agreed upon during the bank’s unusual AGM held in mid December 2015.

The BOD, however, did not conduct the necessary procedures for the election of additional board members. In fact, the body added the shareholder groups’ request as a proposal to the AGM’s agenda, pending further consideration. What the bank should have done otherwise was to announce the additional election procedure and submit the nominations to the State Bank of Vietnam for approval, so that all shareholders could exercise their rights to vote during the planned AGM.

What is more, according to AGM referential documents, the BOD unilaterally decided that “it was not the right time to elect new BOD members,” which essentially goes straight against the spirit of its 2015 AGM’s charter.

These facts are what have been raising the hackles of concerns among Eximbank shareholders, who fear that the BOD may well proceed the same way in the future, and elected to hold up the AGM or refuse to perform any AGM resolutions.

Information asymmetry

According to current regulations, shareholders have the right to know what is going on at the business they own a stake in, obligating the timely disclosure of information. However, this right has been abused by many joint-stock companies. Eximbank is one of those deliberately delaying the disclosure of information at its 2016 AGM. Numerous shareholders were rather surprised reading pages 11 and 12 of the AGM documents, proposing to trim the number of BOD members from 11 to 9, as requested by foreign shareholder groups. These pages were only added to the AGM documents in the morning of the expected meeting on April 29.

Meanwhile, a number of shareholders said that pages 11 and 12 were later posted on Eximbank’s website, but the (official) date of posting was April 28, merely a day prior to the planned AGM. The exact date and time of posting these documents can now only be identified by the people managing the Eximbank website.

Small shareholder groups are thus questioning why the bank posted such important information in the very last minute, and what the intention of the foreign shareholder groups are in requesting to change the number of BOD members barely three days prior to the AGM.

The foreign shareholder group, including Sumitomo Mitsui Banking Corporation, VinaCapital’s Vietnam Opportunity Fund (VOF), and Mirae Asset Exim Investment Limited, have shown inconsistency in requesting a slice in the number of board members, from 11 to 9, for no particular reason, when merely four months ago at the unusual meeting last December, it was them who approved the number 11.
 

Major shareholders’ right to call an AGM

In case when a group of large shareholders opposes a decision made by the BOD of a business, is there any procedure available for them to review the board’s decision?

In accordance with the Law on Enterprises, shareholder groups holding over 10 per cent of the ordinary shares (or a smaller ratio regulated by the company’s charter) over six consecutive months have the right to call for an AGM when the BOD is deemed to seriously violate shareholders’ rights. 

>> Foreign, domestic shareholders fight over control at Eximbank

By By Trang Nguyen

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