Strongly encouraged not to pay dividends to mobilize more capital for the real economy in the face of the coronavirus shock, the major European banks seem ready, with the exception of French banks for the time being.
The pavement was thrown into the pond on Friday by the European supervisor, who called on the big banks of the euro zone not to remunerate their shareholders for the years 2019 and 2020, and this "at least until October 1".
They are also urged not to buy back their own shares - another way to compensate their shareholders - during the pandemic.
Problem: in recent years, the low profitability of banks has resulted in an erosion of their market value.
As a result, "bank executives are even more pressured by shareholders, annoyed by falling shares and who could still hang on to a dividend," said Eric Dor, research director at AFP. Institute of Scientific Economy and Management (IESEG).
"The position of banks vis-à-vis their shareholders is becoming very delicate, the shareholders have lost a lot, it's been a long time and it's getting worse," he said.
Companies generally pay their dividends at the time of general meetings in the spring. They sometimes pay installments before the end of the GA.
- "Common sense" measure -
Giving up dividends could free up 30 billion euros in capital, estimates the European banking supervisor while recalling the measures taken recently by the institution to soften capital requirements or prudent rules on credit in order to guarantee that banks continue to support the economy.
In exchange for these measures, the ECB had already stressed in mid-March that it expected banks to "not increase the distribution of dividends".
The French banking supervisor, in turn, called on Monday the banks active in France and the finance companies to refrain from distributing a dividend.
"It is a measure of common sense on the part of the ECB" which "also demonstrates the usefulness of the single supervisory mechanism," said Nicolas Véron, analyst for the Brussels think tank Bruegel.
First to react, the European Banking Federation, an organization representing banks in the euro zone, recommended suspending dividends for 2020, but to decide on 2019 according to "shareholders' expectations", according to a document consulted by the 'AFP.
On the bank side, the reactions are diverse. The Spanish giant Santander - whose executive has decided to pay part of his salaries to a support fund - announced on Monday that he wanted to "review the dividend" for the year 2020 and propose a "single final dividend" to its shareholders in 2021, specifying that no deposit will be paid in November.
- Reserved French banks -
Several European groups have since pledged not to remunerate their shareholders until at least October, like the German Commerzbank, Dutch banking groups - ING, ABN Amro and Rabobank - and Italians such as Unicredit and Intesa San Paolo.
The latter group also announced Tuesday that twenty of its leaders will donate part of their bonuses acquired in 2019, for a total amount of 6 million euros, to support health initiatives.
This decision echoes the statements of Andrea Enria, published Tuesday by the daily Financial Times, inciting the banks to be "shown extreme moderation in matters of variable remuneration".
Returning to the dividends, the European gendarme of the banks says he hopes "really that the supervisors will not need to intervene on each of the choices made by the banks".
For the time being, French banks have been very reserved on the issue.
Requested by AFP, BNP Paribas, Société Générale and Crédit Agricole SA replied on Monday that they "took note of the recommendations of the ECB" without committing to follow them.
Crédit Agricole SA said it would solicit its directors no later than April 14.
The first major French bank to position itself, Natixis, a listed entity of BPCE, announced Tuesday that the dividend planned for 2019 would not be proposed for approval by its general meeting in May. This decision could possibly be reconsidered after October 1 for possible distribution.
Franco-British investment bank Rothschild and Co made a similar decision on Tuesday. The insurer CNP Assurances for its part indicated on Monday to reserve the entire result for the year 2019 instead of paying a dividend.
© 2020 AFP