The coronavirus continues to affect the financial system. Following the announcement of the cuts in Santander's dividend, CaixaBank's board of directors announced on Thursday night that it would cut April's payment to shareholders by half. “In order to adapt the bank's position to the new environment, and in an exercise of prudence and social responsibility”, the bank “has agreed to reduce the proposed cash dividend for the financial year 2019 to 0.07 euros per share from 0, 15 euros per share (to be paid on April 15), which means a pay-out (the part of the profit that is distributed to the shareholders) of 24.6%, this being the only shareholder remuneration expected from the year 2019 ”. The entity already suffered in its 2019 results due to the strong cuts in staff made.
In addition, it has decided to modify the dividend policy for the financial year 2020 consisting of the distribution of a cash dividend of more than 50% of the reported net profit, “moving to the distribution of a cash dividend of not more than 30% of the reported net profit ” This measure supposes a cut of 40% of the amount that can be delivered among the shareholders.
Furthermore, the CEO of CaixaBank, Gonzalo Gortázar, “has stated his intention to waive the variable remuneration corresponding to this year”.
The expansion of Covid-19 and the measures adopted by the authorities to stop its spread “will have an impact on the global economy that is expected to be short in time, but very severe,” says the entity. The fall in economic activity will affect the results, which will be reflected in the increase in capital that the entity intends to achieve. In its note, it states that “after considering new regulatory and supervisory aspects, the Board agreed to reduce the CET1 solvency ratio objective to 11.5%” (the highest quality), “and to nullify the objective of a CET1 ratio of 12% plus an additional margin of 1% that was intended to absorb the regulatory “impacts, the implementation of which” is now estimated to be delayed over time “.
Extra dividend if the economy improves
However, in case the expected economic improvement arrives and as a hope for the shareholders, the board has also expressed its willingness to distribute excess capital in the future above the CET1 solvency ratio of 12% in the form of an extraordinary dividend and / or repurchase of shares. “This extraordinary distribution of capital will be conditioned on the return of the macroeconomic situation in which the bank operates to a normal environment and will not take place before 2021,” he warns.
Lastly, given the state of alarm “in which the country finds itself, the entity has also decided to call off the Ordinary General Shareholders' Meeting, which was scheduled to take place on April 2 and 3, 2020, on the first and second call, respectively “
The repercussion of this dividend cut will affect what the “la Caixa” Welfare Projects perceives, which has, among its priorities, medical research and care for the elderly, two especially relevant areas at times like current ones, recalls the bank.
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