More and more banks are foregoing dividends

ECB in front of the Frankfurt skyline

The European Central Bank asked banks last week not to distribute profits.

(Photo: Jan Huebner)

Frankfurt, Zurich Numerous banks suspend their dividend payments according to instructions from the European Central Bank (ECB).

The Dutch institutes ABN Amro, ING, Rabobank and the Italian UniCredit, as well as numerous smaller financial houses in the euro area, are not distributing any money to shareholders for the time being. The Swiss banks UBS and Credit Suisse however, are sticking to their dividend plans, as announced on Monday.

The ECB asked banks last week not to pay dividends for 2019 and 2020 until at least October 1 because of the virus pandemic.

A similar request came from the Swiss authorities. They advised banks to “carefully consider” how high the dividends should be in the current environment. The ECB has no supervisory powers over Swiss banks.

“Although we are well capitalized and financed, we think it is wise to follow the ECB’s recommendations,” said ING chief Ralph Hamers, who is to become chief executive officer of UBS later this year.

This gives the bank more flexibility to help customers and society fight the corona crisis. “These are exceptional times for all of us.” After October 1, ING will make further decisions about its dividend policy.

ABN Amro said that the consequences of the virus crisis for customers, the quality of the loan portfolio and the entire economy could not yet be estimated. The bank expects a loss in the first quarter, also because a customer in the US had gambled on risky securities. ABN Amro will therefore follow the advice of the ECB and initially put the dividend plans on hold.

The major Spanish bank Santander had also announced that the planned interim dividend would be canceled. The funds should be used to help people and companies in need, the largest bank in the euro zone justified the move.

UBS maintains dividend

UBS, on the other hand, still wants to pay out $ 0.73 per share to shareholders. The institute has a strong capital base and is strategically well positioned, said a spokeswoman for the money house, which had to be supported by the state during the global financial crisis of 2008/09. “As the largest Swiss bank, UBS is able to support the economy and at the same time pursue an appropriate dividend policy.”

Credit Suisse also said it was pursuing a sustainable dividend policy and would continue to do so. “There are no plans to change existing policies.

UniCredit already announced at the weekend that it would not make a profit distribution and would also suspend share buybacks. The Munich HypoVereinsbank, which belongs to UniCredit, can, on the other hand, transfer a dividend of almost 3.3 billion euros to the Italian parent company as planned, as Bundesbank board member Joachim Wuermeling told the “Handelsblatt”.

“With the recommendation, we want to prevent that in the currently uncertain situation, distributions that may be urgently needed later flow out of the banking system. This is not the case with payments between parent companies and subsidiaries within banking groups. “

The Deutsche Bank does not meet the ECB’s dividend council, as it had already announced that it would not distribute profits for 2019 and 2020 due to its corporate restructuring. The Aareal Bank and the Commerzbank put question marks behind their dividend plans, but haven’t made a final decision yet.

More: The ECB demands that dividends be waived. DZ Bank and top public law institutions may still distribute profits.

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