Bank of Valletta postpones dividend payouts to preserve capital for COVID-19 crisis

Bank of Valletta will postpone the payment of its dividend to 1 October 2020, in line with a recommendation from the European Central Bank on the COVID-19 crisis.

BOV intended to pay out a final gross divided of €0.026 per share, equivalent to a final net of €0.017.

“In light of the COVID-19 pandemic and following a strong recommendation of the ECB on dividend distributions applicable to all European banks, BOV has decided to keep the initial proposal for distribution of the dividend but make the actual payment conditional to the reassessment of the situation once the uncertainties caused by COVID-19 disappear, the earliest of which, in line with the ECB’s recommendation, would be 1 October 2020,” BOV said.

BOV started 2020 with a robust capital base and strong liquidity buffers. “The Group is closely monitoring the situation and constantly assessing the impact of the COVID-19 pandemic. In these uncertain times conservation of capital is a priority as Bank of Valletta is committed to support its clients, both business and personal customers, and the Maltese economy by offering a range of supports in a responsible and prudent way.”

The European Central Bank has asked eurozone banks to freeze dividend payments until at least October 2020 to preserve liquidity that can be used to help households and companies through the coronavirus crisis.

The Frankfurt institution also asked banks not to buy back shares, another tool to reward shareholders, at a time when policymakers everywhere are taking unprecedented steps to support the global economy.

“The coronavirus outbreak is threatening the lives of many people around the globe and is pushing the economies of many countries into recession,’ ECB supervisory board chair Andrea Enria said.

“Unlike in the 2008 financial crisis, banks are not the source of the problem this time. But we need to ensure that they can be part of the solution,” Andrea Enria said.

He estimated that compliance with the ECB’s proposal would keep an extra €30 billion of capital in the financial system.

The ECB said it was not asking for those payouts to be scrapped, but lenders whose shareholders are set to vote on dividend proposals in upcoming annual meetings “will be expected to amend such proposals in line with the updated recommendation”.

That ECB has launched a “big bazooka” scheme to buy an additional €750 billion in government and corporate bonds this year to keep cash flowing through the financial system, and a fresh round of ultra-cheap loans to banks and eased rules on capital buffers to encourage banks to offer loans to households and businesses.

The European Banking Authority has also requested institutions to refrain from the distribution of dividends or share buybacks for the purpose of remunerating shareholders and assess their remuneration policies in line with the risks stemming from the economic situation.