NN IP: Lifting of dividend ban will boost European banks

NN IP: Lifting of dividend ban will boost European banks

6 augustus 2021

ECB
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Featured below is a commentary by Albert Ploegh, Senior Investment Analyst European Equities at NN Investment Partners, in response to the decision by the ECB on July 23 to lift the dividend ban from 30 September 2021.

"We expect banks to undertake share buybacks and distribute suspended dividends over the fiscal years 2019 and 2020. The return to a normal dividend policy is a clear positive, at least one less thing to worry about when investing in European banks."

"The 2021 EBA stress test results published on July 30 should not comprise dividend expectations. Under the adverse scenario for 2023, the 50 EU-banks that participated in the stress test saw their CET1 ratio (fully loaded) decline on average by 485bps (2018 stress test 420bps) from 15.0% to a still sound level of  10.2% (2018 stress test 10.4%). Credit risk costs were, as expected, the biggest driver at -423bps (2018 stress test 425bps)."

"The assumptions in the adverse scenario in the 2021 stress test were much tougher compared to 2018 and having a similar drawdown impact means the sector overall has become more resilient."

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