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3 years ago
UPDATE 1-Spanish banks face fresh cash dividend curbs in 2014
February 21, 2014 / 8:36 PM / 3 years ago

UPDATE 1-Spanish banks face fresh cash dividend curbs in 2014

3 Min Read

(Adds statement from central bank, background on economic crisis)

MADRID, Feb 21 (Reuters) - The Bank of Spain said on Friday it had told banks it was extending a recommendation to cap dividend payouts in cash at 25 percent of profits for another year, to encourage lenders to keep strengthening their capital.

The central bank first introduced the guidance last year, forcing banks such as BBVA and Bankinter to cut 2013 shareholder payouts in order to comply.

Most other banks in Spain pay more than 75 percent of their dividends in shares, though lenders should also try to moderate these types of handouts, the Bank of Spain said.

Like European peers, Spain's banks face region-wide reviews of their assets this year and health checks on their balance sheet before the European Central Bank takes over as supervisor.

That has already pushed banks to bolster their capital though asset sales, debt issues or by bringing in new investors.

"In this context, the Bank of Spain considers it convenient for entities to keep applying rigorous capital preservation policies and to keep strengthening their solvency levels," the central bank said in a statement.

Spain's banks are recovering from a property market crash and an economic crisis that gutted their earnings and pushed the government to request 41.3 billion euros ($57 billion) in European aid in 2012 to help the weakest plug capital holes.

Many were already bracing for an extension to the dividend recommendations, after the International Monetary Fund (IMF), which is monitoring Spain's progress with financial reforms, called for the cap to be repeated in 2014.

The Bank of Spain said on Friday that banks might exceptionally be able to exceed the recommended cash payout limit, but as long as they showed their income was set to grow strongly and that their core capital ratio exceeded 11.5 percent of risk-weighted assets as of Jan. 1, 2014.

Bankinter, which pays its dividend entirely in cash, on Thursday cut its payout against 2013 earnings.

BBVA also had to cut its 2013 handout. It has said it had initial plans to make two 2014 dividend payments in cash and two others in scrip, which allows shareholders to choose between cash and shares.

BBVA said it would have to analyse the measures in more detail before commenting. Bankinter could not immediately be reached for comment. ($1 = 0.7275 euros) (Reporting by Sarah White; Editing by Paul Day and Lisa Shumaker)

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