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ANALYSIS OF DIVIDEND POLICY AND DIVIDEND PAYMENTS IN
PRIVATE AND STATE-OWNED BANKS OF UZBEKISTAN
G’aniyev Sardor Murodulla o’g’li
Associate Professor of Business Management
Department of ISFT Institute
https://doi.org/10.5281/zenodo.15654135
Abstract
This article discusses the conceptual foundations of dividend policy,
analyzing the distribution of profits, dividend policy, the theory of dividends,
distribution of dividends and payment of dividends in state and commercial
banks.
Keywords:
Joint stock companies, dividends, commercial bank, payment of
dividends, profit distribution, dividend policy, shareholder.
Introduction
.
It serves to increase investment attractiveness for corporate structures,
including joint-stock companies. That is, dividends serve as a kind of free
advertising to ensure the successful placement of additional shares and increase
the share price. If the shares are placed at a price higher than the nominal value
due to the investment attractiveness of the additional issue of shares, the
attraction of cheap capital is achieved as a result of the decrease in the capital
price due to the increase of the added capital. This aspect is one of the important
criteria that ensures efficiency in corporate finance management. Because
attracting capital at a low price through shares serves to increase the efficiency
of the implemented project. Ultimately, these aspects can be expected to
increase the market capitalization of the joint-stock company.
Analysis of literature on the topic.
S. Elmirzaev also noted that as another result that can be obtained by
rationally conducting the dividend policy, it can be a unique basis for attracting
financial resources through the primary public placement of shares. In addition,
it should be noted that effective dividend practices are a motivating factor not
only for foreign capital, but also for raising capital within the national capital
market. Only then, we note here that the ability to make the dividend practice a
primary issue in relations with investors after the practice of public placement
of shares is an urgent issue before corporate finance management.
N. Sherkuzieva, one of our scientists who has conducted extensive research
on dividend policy, thoroughly researches dividend theories and divides them
into theories that support and deny the importance of dividends (Table 1).
Based on the given table data, we should note that each dividend theory has its
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own advantages and disadvantages. But today, in terms of developing the
financial market and gaining the trust of global investors, the dividend is crucial.
Table 1
Basic theories of dividend policy
1
Classification
of theories
The name of
the theory
Founders of
the theory
The main idea
Theories that
deny
the
importance
of dividends
Dividend
irrelevance
theory
F. Modigliani
M. Miller
The founders of the theory
put forward the idea that the
dividend policy does not
affect the market value of
the company, nor the
financial condition of the
owners
A theory of
tax-mediated
preferences
R.
Littsenberger
K.
Ramaswamy
Dividend
policy
is
considered as a criterion for
minimizing tax payments
from current and future
income of the owners.
Therefore, the process of
minimizing
dividend
payments and maximizing
profit
reinvestment
is
important
Theories
supporting
the
importance
of dividends
Dividend
preference or
"bird in the
hand" theory
M. Gordon
J. Lintner
Investors prefer current
period profits in the form of
dividends
rather
than
reinvesting profits
Signal theory
of dividends
S. Ross
Dividends are a means of
signaling to investors about
a company's prospects and
its financial condition
The theory of
"Customer
effect".
M. Brennan
The company's dividend
policy is based on investors'
expectations.
In
turn,
investors choose a company
based on its dividend policy
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That is, at the time when the stock market is becoming global, any investor
wants to get a constant profit and dispose of it freely. In this case, when
dividends are considered a source of passive income, they also serve as a unique
signal for stock price fluctuations. As a result, there are opportunities to earn
from the difference in the exchange rate, which is considered as active income.
We should note that this aspect creates an opportunity to increase the influence
of joint-stock companies not only in the national capital market, but also in the
global financial market.
Research methodology.
One of the most important aspects in managing corporate finance is
undoubtedly making financial decisions related to the practice of paying
dividends to shareholders through the rational distribution of profits. This
aspect is considered within the framework of the dividend policy of joint-stock
companies. The importance of dividends for the economy, especially for joint-
stock companies, is characterized by its versatility.
Analysis and results.
As we know, according to the current legislation in our republic,
commercial banks must be organized only as joint-stock companies from the
point of view of organizational and legal form
2
. This aspect shows that
commercial banks must also have a dividend policy and establish financial
relations with shareholders related to dividends. Therefore, below we will
analyze the profit distribution, dividend policy and dividend payments of private
and state-owned commercial banks operating in our republic.
In recent years, one of the commercial banks undergoing transformation
with the support of the International Finance Corporation and taking a number
of measures to prepare for privatization is the joint-stock commercial mortgage
bank "Ipotekabank". The nominal value of one share of Ipotekabank is 1 soum,
and the composition of shareholders owning the authorized capital is as follows
(Table 2):
Table 2
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Composition of shareholders of Ipotekabank ATB
3
№
List of shareholders
Share in the authorized
capital, in percent
1
Ministry of Finance of the Republic of
Uzbekistan
96,9
2
Other legal entities (number of shareholders
- 4729)
2,64
3
Individuals (number of shareholders –
11,685)
0,46
Authorized capital (total number of
shareholders - 16415)
100
As of April 1, 2022, the authorized capital of Ipotekabank (two trillion nine
hundred ninety two billion two hundred four million twenty one thousand nine
hundred thirty eight) is 2 992 204 021 938 soums. It is clear from the above
table that 96.9% of the authorized capital of the bank is owned by the Ministry
of Finance of the Republic of Uzbekistan on behalf of the state. The share of
other shareholders is equal to 3.1 percent.
Dividends of Ipotekabank, which was established in 2005 on the basis of
the mutual merger of “Zaminbank” and “Uzuyjoyjamag’armabank”, calculated
and paid during its activity are as follows (Table 3):
4
№
Annual
results
Years paid
Dividends calculated and paid are in
cash
Accrued dividends
in the form of
capitalization
Total revenue
The
nominal
value of the
share
To a common
stock
To the preferential
share
Per share
A common
stock
The
preferential
share
Per share
%
soum
%
soum
%
soum
%
%
In soum
1
2005
2005-2006
2
0
200,00
40
400,00
-
-
20
40
1 000
2
2006
2006-2007
-
-
40
400,00
-
-
-
40
1 000
3
2007
2007-2008
1
3
130,00
40
400,00
-
-
13
40
1 000
4
2008
2008-2009
1
5
150,00
40
400,00
-
-
15
40
1 000
5
2009
2009-2010
1
5
150,00
25
250,00
-
-
15
25
1 000
6
2010
2010-2011
4
40,00
25
250,00
36
360,00
40
61
1 000
7
2011
2011-2012
5
68,00
25
317,50
25
340,00
30
50
1 360
8
2012
2012-2013
5
85,00
25
403,75
36,5
450,00
41,5
61,5
1 700
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9
2013
2013-2014
-
25
509,40
31,3
672,00
31,3
56,3
2 150
10
2014
2015
-
-
25
705,50
26,8
756,00
26,8
51,8
2 822
11
2015*
2016
1,5
54,00
25
894,50
12,5
448*
14
37,5
3 578
12
2016
2017
8
0,08
25
0,25
-
8
25
1
13
2017
2018
6
0,06
25
0,25
-
6
25
1
14
2018
2019
8
0,08
25
0,25
-
8
25
1
15
2019
2020
-
-
25
0,25
-
-
25
1
16
2020
2021
-
-
25
0,25
-
-
25
1
The information in the above table shows that Ipotekabank regularly pays
attention to dividend payments. It is possible to witness both the payment of
dividends in the form of money and the payment of dividends in the form of
shares. It should be noted that at the end of 2005-2008, 40 percent of the
nominal dividend was paid to the owners of preferred shares in the form of cash.
At the end of 2009-2020, a 25 percent cash dividend was paid to the owners of
preferred shares. It should be noted that for the years 2010-2015, 36%, 25%,
36.5%, 31.3%, 26.8%, 12.5 dividends in the form of interest shares have also
been paid. As a result, the profitability and investment attractiveness of
preferred shares has been sharply increased.
According to the end of the year, 20% of nominal dividends were paid for
ordinary shares in 2005, 13% in 2007, 15% in 2008-2009, 8% in 2016, 6% in
2017, and 8% in 2018. For 2010-2012 and at the end of 2015, dividends were
paid both in cash and in the form of shares. In particular, at the end of 2010, 4
percent of dividends were paid in the form of money and 36 percent in the form
of shares, while these indicators were 5 and 25 percent at the end of 2011, and 5
and 36.5 percent at the end of 2012, respectively. The associate is provided with
high attractiveness on ordinary shares.
As of the end of 2015, we can witness that 1.5 percent of common shares
were paid in the form of cash and 12.5 percent in the form of shares. These
dividends were implemented on the basis of the decision of the general meeting
of shareholders of the bank on May 29, 2017, based on the financial results of
the bank in 2015, to carry out capitalization by crushing and issuing additional
shares, in which 448 additional shares will be added for every 3578 shares. It
should be noted here that dividend payments in the form of shares at the end of
2010-2015 were made by increasing the nominal value of shares. This practice
has been banned since 2016 according to the current legislation.
We can see that the composition of shareholders in the private joint-stock
commercial bank Trustbank is as follows (Table 4).
Table 4
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Composition of shareholders of Trustbank PJSCB
5
№
Shareholder - the name
of a legal entity or
shareholder - the name
of a natural person
The
amount of the
shareholder's
share
in
the
authorized
capital of the
bank
The type
of stock you
own
Placed
husband/
residential address
1
“MADI GmbH” LLC
5,00%
Ordinary
shares
55 Eschborner Strasse,
Steinbach, Federal Republic
of Germany
2
“DIMINUR GROUP” LLC
12,11%
Ordinary
shares
Tashkent city, Amir Temur
avenue, 60
3.
“PRESYSTEM UNIVERSAL”
LLC
17,96%
Ordinary and
preferential
shares
Tashkent city, Sirgali
district, Fayzli street, 3
3.
Sharipov T.M.
23,27%
Ordinary
shares
Republic of Uzbekistan,
Tashkent city, Yakkasaroy
district
5
Parpiyev D.B.
23,27%
Ordinary
shares
Republic of Uzbekistan,
Tashkent city, Yakkasaroy
district
6
Maxmudova D.M
15,03%
Ordinary and
preferential
shares
Republic of Uzbekistan,
Tashkent city, Mirzo
Ulugbek district
7
Other shareholders
3,36%
Ordinary and
preferential
shares
Uzbekistan
From the information in the above table, we can see that no one person's
share in Trustbank is more than 50 percent, that is, no shareholder owns a
controlling package and has no decisive vote. This aspect is of particular
importance in the practice of purely corporate management based on the
conflict of interests in a bank, in general, in any joint-stock company. In the
analyzed joint-stock companies, we cannot say that purely corporate
management is in effect, since the majority of shares (more than 90 percent) are
owned by the state. As a result, attention to dividends is very low. At Trustbank,
thanks to pure corporate management, priority is given to result-oriented
activities and the interests of shareholders (Table 5).
Table 5
Analysis of calculated and paid dividends in relation to the nominal
value of Trustbank PJSCB shares
6
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Indicators
During 2019
During 2020
During 2021
Per common stock,
in percentage of
par
61,3
101,4
25,0
-
amount
of
calculated and paid
dividends (million
soums)
98 219,15
228 380,18
90 056,75
On
preferential
shares:
15
15
15
-
amount
of
calculated and paid
dividends (million
soums)
3,45
3,45
3,45
It should be noted that although the dividend paid on ordinary shares in
Trustbank has a sharp volatility compared to the nominal value, it is actually
sufficient to satisfy the investor. The fact that 61.3 percent of the dividend was
paid in 2019, and 101.4 percent in 2020 compared to the nominal value of the
common stock, indicates that a sharp high dividend was paid. Even the fact that
25 percent was paid in 2021 indicates that a higher than market yield was paid.
Dividend payments of the private joint-stock commercial bank
"Hamkorbank" for the years 2017-2021 were made only on preferred shares
(Table 6).
Table 6
Analysis of dividend payments of "Hamkorbank" JSCB for the years
20217-2021
7
End of the
year
For ordinary
shares
For
preferential
shares
Total dividend
payment, million
soums
Net profit of
the bank,
million
soums
%
сўм
%
сўм
2017 year
0
0
30
46.5
763,7
132147,73
2018 year
0
0
30 1.5
1010,14
232323,94
2019 year
0
0
30 1.5
1010,14
325995,98
2020 year
0
0
30 1.5
1010,14
383002,92
2021 year
0
0
30 1.5
1010,14
500272,25
During the last four years, a 30 percent dividend has been paid on preferred
shares. Due to the fact that additional preferential shares were not put into
circulation or private shares were not bought back, the amount of dividend paid
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did not change, that is, it was the same 1010.14 million soums. One of the main
features of Hamkorbank is the high yield rate of dividends on preferred shares
compared to the dividends of preferred shares of other banks, as well as joint-
stock companies in other industries and sectors.
Conclusions and suggestions
Today, in the conditions of intense competition in the world economy, the
scope and scope of financial relations is expanding. We can see this aspect in the
practices of attracting financial resources, especially capital attraction through
shares. As a result, the global open or public offering of shares has in itself
accelerated the transition of relations with shareholders to a global scope. In this
regard, global IPO (initial public offering of shares) practices are gaining
particular importance. Financial relations with shareholders on a global scale
are creating the basis for the implementation of dividend practices on a global
scale.
As we know, the market of mergers and acquisitions is also developed in
countries with developed stock market. In this case, large business entities seek
to establish control over relatively recently developing joint-stock companies by
acquiring control packages of shares. In this way, the market dominance is
maintained by the acquiring companies. Acquiring companies regularly offer,
albeit small, shares in order to acquire a share package of a joint-stock company
that is intended to be acquired. If the target joint-stock company does not pay
enough attention to dividend practices, its shareholders will try to get rid of
such shares as soon as possible. As a result, the company will be transferred to
another hand. Therefore, companies that have not entered the market should
pay dividends as much as possible and try to convince their shareholders that
their projects are promising. As a result, dividends appear as a kind of hedge in
the mergers and acquisitions market.
List of sources and references:
1.
Elmirzaev S., Sherkuzieva N., Shavkatov N., Karimov A., Abdurahimova D.,
Boev B. Modern corporate financial relations: theory, practice and development
prospects. Collective monograph. - T.: "Economy-finance", 2022. - B. 30. (144 p.)
2.
Law of the Republic of Uzbekistan "On Banks and Banking Activities",
Article 15. November 5, 2019
3.
https://www.ipotekabank.uz/uz/investors/shai_sharad/
4.
https://www.ipotekabank.uz/uz/investors/shai_sharad/
2005-2020
yillar uchun hisoblangan va to'lab berilgan dividendlar tarihi.pdf
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5.
https://trustbank.uz/oz/shareholders/structure/over-5-percent/
6.
https://trastbank.uz/uz/shareholders/distribution-of-profits/dividends/
7.
https://hamkorbank.uz/uz/for-investors/divident-information/
