The day of truth is approaching. Tuesday 15Indeed, the ECB's banking supervisory board will decide the new guidelines for bank dividends in 2021. And it won't be an easy decision, after a nine-month standstill in which bank shareholders had to give up coupons for 30 billion. Indeed, as revealed by the Financial Times, supervisory opinion is deeply divided: France, in line with what was established last week by the Bank of England, is in favor of reopening the taps.
Much more rigid Italians and Germans, while in a note released a few days ago Elisabeth McCaul, one of the members of the Frankfurt committee went so far as to argue that "several banks have a too optimistic view of the situation", with too fragile reserves in view of the risks looming for a system weakened by the second wave of the pandemic.
According to forecasts, the conflict will result in a compromise that will allow a part of the 117 systemic institutions supervised by Frankfurt to proceed with payments according to strict rules which reflect the memory of the 2008/09 crisis. But in doing so, it is the criticism, the improvements in the sector are not taken into account with the opposite result of driving investors away from the sector which suffers a 22 percent drop compared to the beginning of the year, the heaviest in a positive year for the stock exchanges.
Even because Italy's progress is indisputable, which significantly reduced its exposure by relegating French banks to bring up the rear with a total exposure of 127 billion. In total, the doubtful positions at continental levels amount to 528 billion against free reserves for 318. More than enough, according to the doves, except that the gray areas are multiplying.
IThe conflict will be resolved by compromise: in principle, banks will be able to resume paying the dividend if they can demonstrate that they have sufficient cash on hand to face the feared wave of insolvencies linked to Covid. According to rumors reported by Bloomberg a pay-out limit of 25% is assumed for the most solid banks on 2019 and 2020 profits. However, it is possible that the limit is 20%. However, an approach that takes greater account of the situation of individual banks is also not excluded. The indications of the SSM will then be taken as a reference by the Bank of Italy for the banks subject to its supervision.
Frankfurt's decision is obviously eagerly awaited by Italian banks also because the Foundations, major shareholders of the system, begin to have big problemsto guarantee disbursements. In any case, the market today does not discount a full dividend in prices, it has always been cautious. Indeed, many analysts have so far assumed that the 2019 profit set aside will not be affected and that eventually the best European groups will be able to start detaching the coupon using part of the profits recorded in 2020.
According to Fidentiis, if a 20% payout limit is set, the banking sector should register an average dividend yield of 2% per year. In particular, Intesa Sanpaolo would have a coupon yield of 1,9% for 2020 (on 2019 earnings) and 1,9% in 2021, Unicreditnothing for 2020 and 2,3% for 2021, Bpm bank 1,2% in 2020 and 1,3% in 2021, while Bper should post a yield of 1,5% in 2020 and 1,6% in 2021.
In particular, the market watches carefully to the banking licensed asset manager sector (Banca Mediolanum, Banca Generali and FinecoBank). Banca Mediolanum and Banca Generali said they were convinced they could distribute both what was announced for 2019 profits and a normalized dividend for 2020. The declarations of FinecoBank were more cautious, which said it was interested in distributing the excess capital as soon as possible.
Based on a 20% pay-out hypothesis on 2019 and 2020, the dividend per share would need to be significantly revised downwards as follows: Banca Mediolanum from 0,70 euro to 0,25 euro (dividend yield from 9,9% to 3,5%), Banca Generali from 3,1 euro to 0,87 euro (div. Yield from 11,6% to 3,3%). FinecoBank from 0,39 euro to 0,20 euro (div. Yield from 3,0% to 1,5%), however, no impact for companies without a banking license such as Azimut and Anima.
