12° Nicosia,
22 July, 2024

2023 will be the year banks dole out dividends

Cyprus' credit institutions have not returned money to their shareholders for over 10 years

Panayiotis Rougalas

Panayiotis Rougalas

Apart from entering 2023 with inflationary tendencies and following a year with a geopolitical crisis due to the Ukrainian one, it is expected to be the year when the term "dividend distribution," which has been banned for many years, will be reinstated at the local banking level. The island's two major banks had prepared the ground with cautious statements of intent to distribute dividends beginning in 2021, but it is now 2023, and these statements will be implemented. Banks have not paid a dividend to their shareholders in more than a decade.

In particular, since 2010 the Bank of Cyprus and since 2012 the Hellenic Bank. Returning to "today", it should be taken for granted now that both banks, Bank of Cyprus and Hellenic, will have to pay dividends to their shareholders within 2023, thus lifting the ban imposed by the European Authority. Prior to the official bans, the banks decided to stop paying dividends. The decisions to ban dividend distribution were based on supervisory decisions following the Supervisory Review and Evaluation Process (SREP) conducted on the banks in 2013. The fact that the two banks are returning to dividend distribution marks "normality" for Cypriot banking standards, which is natural if we factor into the whole equation that their results are "miles away" from the picture they presented at the time they were banned from distributing. The distribution of dividends is a turning point that marks a new era, a new picture for banking in Cyprus. This is the image that the institutions and the houses see, which is why we have seen only upgrades in recent years.

According to Bank of Cyprus CEO Panicos Nikolaou, the bank will distribute dividends in 2023 for either the 2022 preliminary-interim results or the 2023 preliminary-interim results.

Bank of Cyprus will distribute dividends in 2023, as explained by its CEO, Panicos Nikolaou, during the presentation of the 2022 results. According to him, the dividend distribution to the Bank's shareholders will be made for either the 2022 or 2023 interim results.

Hellenic Bank, may not have presented its final results for 2022 yet (1 March 2023 will be presented). However, in late December 2022 it had explained in the approval bulletin of its strategic plan for the three-year period 2023-2025 that, the Bank will apply to the supervisory authorities to start paying dividends from 2023 onwards, which of course will be given after the supervisory approvals. Relevant dividend announcements had also been made within the previous year by its CEO, Oliver Gatske.

After reviewing the Bank of Cyprus's financial results for 2011, the Board of Directors decided not to propose a dividend. In June 2011, the final dividend for the fiscal year 2010 of EUR 0.03 per share (a total of EUR 26,848 thousand) was paid. In November 2010, an interim dividend of EUR 0.06 per share in cash was paid, totaling EUR 46,612 thousand. Furthermore, taking into account the amount of reserves and dividend distribution legislation, the Board of Directors proceeded in November 2010 with a special pre-dividend distribution of EUR 0.50 per share in the form of shares for a total amount of EUR 388,430 thousand with a reinvestment price of EUR 3.25 per share.

The Board of Directors of Hellenic Bank had not proposed the payment of a dividend for the year 2013 at the Annual General Meeting of Shareholders, while as shown by the Bank's results, for 2012 it had paid a dividend of 1.02 million euros and for 2011 it paid a dividend of 570 thousand euros.

Supervisor expectations

The European supervisor, the SSM, will give the green light for the distribution of dividends. In essence, based on the results of the banks he will see, he will "assess" the banks' operating profitability and the amount of non-performing loans on their balance sheets. Rising interest rates will certainly contribute to a "yes" as they are recording enough profits, while the "counterbalance" will be the suspicion of new bad loans being created due to the international economic environment. The two banks due to liquidity deposited with central banks and due to interest rates have a big "trump card" in getting approval for dividend distribution, while for Cypriot banks in particular, the economic climate is also favorable. At least more favorable than all other European countries, as Cyprus' economy is one of the 2-3 countries that will do well in 2023. But this does not mean that banks should "relax", as difficulties in paying loans have started to "knock on the door" of borrowers who until now have not faced any repayment difficulties.

More attractive share prices

With the picture improving, but also with declarations of dividend distributions, as K wrote again, a new air is being given to their share price, and therefore, as a result, to their stock market value. The market value of the two banks has more than doubled in a year, with the Bank of Cyprus share price reaching 2.49 euros and the Greek share price at 1.77 euros. In one year the market value of the Bank of Cyprus has increased by 129.4% and that of Greece by 118.5%. The lowest price reached in the last 52 weeks by the Bank of Cyprus share price was EUR 0.88 per share and that of the Hellenic Bank in the last 52 weeks was EUR 0.67 per share. The Bank of Cyprus price today (yesterday to be precise) is up EUR 1.61 from its lowest point and the Hellenic Bank price is up EUR 1.1 from its lowest point in the last 52 weeks.

[This article was first published in Kathimerini's 'Oikonomiki' edition and translated from its Greek original]

Cyprus  |  banks  |  economy

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