Absa to go ahead paying dividend
Absa will follow through with a R5.3bn shareholder payout later in April, it said on Tuesday, reassuring investors after the Reserve Bank urged lenders to consider closing dividend taps.
Absa will follow through with a R5.3bn shareholder payout later in April, it said on Tuesday, reassuring investors after the Reserve Bank urged lenders to consider closing dividend taps and use the money to contain the economic fallout from the novel coronavirus.
“While the board agrees with the need to conserve capital in the current environment, legal advice confirms that a dividend must be paid after having been declared and communicated,” Absa said in a statement.
The lender’s comments come a day after the central bank’s supervision division, the Prudential Authority, issued a nonbinding recommendation for the industry to consider suspending dividends and putting bonuses to senior managers on hold to build up capital buffers and continue lending.
Businesses and households are hunkering down for a prolonged economic slowdown after President Cyril Ramaphosa issued a 21-day lockdown to fight the spread of the virus. The move has triggered a fight for survival for businesses cut off from their customers and forced some employees to forfeit all or portions of their salaries.
Absa is due to pay 620c per share in final dividends, translating into just more than R5.3bn in payouts to shareholders in the six months to the end of December. The company said it will take the Prudential Authority’s guidelines into consideration in the 2020 fiscal year.
Rival Standard Bank, which is due to pay ordinary shareholders about R8.6bn in dividends in April, said it is considering the recommendation.
“The board fully recognises the importance of dividends to the group’s owners,” Standard Bank said in a statement.
“However, it also recognises the need to support households and businesses amid the Covid19 pandemic and the importance of ensuring the stability of the group in the short, medium and long term,” the bank said.
But given that the dividend has already been declared and shareholders told to expect the payment, it might have to follow in Absa’s footsteps. Nedbank, which is due to reward shareholders with R3.5bn later in April, is in the same boat.
The JSE banking index fell as much as 4% on Monday before recouping all the losses to close 6.72% higher and far outpacing a 2.72% gain by the broader JSE all-share index. The banking index has lost more than onethird of its value so far in 2020, more than twice the decline of the broader market.
FirstRand, with a portfolio that includes FNB, Rand Merchant Bank (RMB) and WesBank, paid its interim dividend of R1.46 a share, or a total of R8.2bn, on Monday.
Capitec is scheduled to release its results to end-February in mid-April. In its year to end-February 2019, the group declared a final dividend of R11.20; it has about 115-million shares in issue.
The guidelines on shareholder and executive bonus are the latest effort by the central bank to free up capital for the industry to absorb defaults and continue to lend to the economy, whose fragile prospects have been whacked by the pandemic and higher borrowing costs after ratings agency Moody’s Investors Service sent the country’s sovereign debt to junk.
Last week, the Bank said it would give lenders a break for dipping into their regulatory capital buffers to free up about R320bn in lending. The central bank has also said it will be flexible about how banks account for clients who have taken up a range of debt relief and payment holidays to cope with the economic effect of the virus.
The Bank has given lenders breathing room through relaxing capital and liquidity requirements, said Ron Klipin of Cratos Asset Management.
“So, as a quid pro quo, the conservative way ahead is to maintain strong balance sheets,” Klipin said.