WOOD Flash – CEE banks: ECB issues restrictive guidance on dividend capacity for the banks

The ECB has published its dividend guidance for the banks. The main message is for the banks to refrain from paying out, or limiting, dividends until end-September 2021. Should the banks be willing to pay dividends, they should be capped at a maximum of 15% of the cumulated 2019-20E net profit, and be the maximum equivalent of 20bps of the CET1 ratio. The banks that are planning to pay dividends have to be profitable, with “robust capital trajectories”. The banks are also expected to consult the Joint Supervisory Team on their plans. No interim dividends for 2021E will be allowed next year. We note that this recommendation affects only the Austrian banks and NLB directly within our coverage space as the Romanian, Czech, Hungarian and Polish banks will wait for their local regulators to issue statements. However, we see it as extremely unlikely for these regulators to act less conservatively than the ECB. If anything, we suspect that some of them might be even more restrictive. We note that this recommendation does not carry a cross-read for the Russian and Turkish banks, while the Georgian banks are restricted from payouts in any case.