At least two South African banks set to pay dividends after central bank eases policy – analysts
JOHANNESBURG (Reuters) – At least two of South Africa’s major banks are expected to declare dividends after the central bank eased its payment forecast last week, analysts and investors said.
The South African Reserve Bank had advised banks in April not to pay dividends or bonuses to preserve capital during the coronavirus crisis, prompting lenders to halt distributions even though some reported they had the resources. sufficient to pay.
The move will have left bank boards scrambling to make a decision just ahead of their bottom line, with lender FirstRand, for example, staying just over a week ahead of its due date.
But analysts and investors told Reuters that at least two of the country’s four major lenders, and possibly all, would ultimately choose to pay.
David Talpert, analyst at Avior Capital Markets, said Standard Bank and FirstRand were in the best position to declare a dividend because they had more capital.
Standard Bank already announced last year that it was discussing a possible declaration of dividend in March with the SARB. Another lender, Investec, chose to declare a dividend in November despite forecasts.
“We expect Absa and Nedbank to suspend their dividends until the second half of the year, because if their … capital levels are well above regulatory minimums, they are at the end of their ranges. internal targets, ”Talpert added.
A leading investor who asked not to be named agreed with his point of view, but said the four could make a payout.
FirstRand and Nedbank declined to comment. Standard Bank, Absa and Capitec did not immediately comment or respond to requests immediately.
South African banks have all suffered as hefty bad debt provisions slashed a large chunk of profits, but their capital levels have remained strong and many say the credit situation is improving.
The SARB said in its guidelines that banks should consider a number of factors, including current and projected capital levels, internal goals and future risks, when making dividend decisions in order to s ” ensure that they have sufficient capital to support the economy in a context of high uncertainty.
Stuart Theobald, president of Intellidex, said he expects the Big Four banks to report a payment as lenders want to protect the investment record of their shares.
“I expect (the payments) to be lower than their historic dividend policies, however, as banks will need to be careful in the face of lingering uncertainties about the pandemic.”
Reporting by Emma Rumney; Editing by Jan Harvey