UPDATE 1-Euro zone banks to cut dividends by two thirds due to pandemic -ECB

  • 12/16/2020
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* Enria sees payouts at 10-12 bln euros * Wuermeling sees German banks halving dividends (Combines Enria, Wuermeling) FRANKFURT, Dec 16 (Reuters) - The European Central Bank expects euro zone banks to cut their dividends by two thirds this year compared to their usual payouts to cope with losses caused by the coronavirus pandemic, the ECB’s top supervisor Andrea Enria said on Wednesday. The ECB lifted a de facto ban on dividends and buybacks this week but capped payouts, still bracing for a new wave of unpaid loans this year as the economy struggles with the outbreak and the ensuing restrictions. Enria said supervisors expected dividend payments worth between 10 billion euros and 12 billion euros ($12.2 billion-14.6 billion) through next September, when they intend to lift the cap. “We expect dividend payments in the 10 to 12 billion euros region, so roughly a third of what European banks pay in a normal year,” Enria said at a meeting of the Italian banking lobby. Speaking to Reuters, German bank supervisor Joachim Wuermeling said large German banks would be able to pay roughly half the amount they had originally earmarked for shareholders. Bankers have been complaining they would struggle to attract investors if they were not allowed to remunerate them. But some politicians thought no payout should be allowed while banks receive subsidised liquidity from the ECB at negative rates and governments guarantee bank loans. “This simply does not fit together,” Sven Giegold, a German member of the European Parliament, said. “Billions of taxpayers’ money flows directly from the public purse to the banks’ shareholders.” Enria said the ECB will let banks eat into their capital and liquidity buffers for as long as necessary before dialling back that measure according to a gradual schedule. The euro zone is still struggling under the second wave of the coronavirus pandemic, with delinquencies expected to rise in the coming months as some government support schemes are phased out and companies and households run out of savings. But the prospect of a vaccine means that the outlook further out seems rosier, leading the ECB to project the euro zone’s economy will rebound by 3.9% next year and 4.2% in 2022.

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