JERUSALEM, Aug 3 (Reuters) – Bank Hapoalim (POLI.TA) is confident that its financial position will enable it to resume regular ordinary dividend payments once the regulator gives the green light, chief financial officer Ram Gev said on Tuesday. Hapoalim, one of Israel’s two largest banks, on Sunday became the first to announce an extraordinary dividend after the country’s Supervisor of Banks last month told lenders they could make a one-time payout up to 30% of 2020 net profit. At the start of the coronavirus pandemic last year, the central bank instructed lenders to suspend dividend distribution and share buy-backs but also reduced capital requirements.
That remains in place through September and the Bank of Israel has said it is examining whether to extend this policy or end it by looking at European and other regulators’ directives.
The European Central Bank has lifted restrictions on bank dividend payments and share buybacks beyond September. Gev called Hapoalim’s planned 616.8 million shekel ($191.5 million) dividend for Aug. 18 a “catch up” from not being able to pay out last year and a signal that banks’ buffers are high and business is returning to normal.
He said a regular dividend policy of 40% of net profit remained and that would resume once the central bank’s temporary order ended. “Maybe we will consider increasing it (from 40%) but that depends on the Bank of Israel and other relevant circumstances. And we want to be back to our dividend policy as fast as the temporary order ends,” Gev told Reuters. He said the bank would also like to consider share buybacks, while also hoping to issue contingent convertible (CoCo) bonds to optimise capital structure. In the meantime, Gev said Hapoalim’s balance sheet was strong, especially after building up large reserves in 2020 to cope with the pandemic.
The bank began unwinding some of those default provisions early this year, but Gev said Hapoalim – due to issue second-quarter results this month – would be able to deal with any fallout should the Delta variant lead to an economic deterioration.
“We see the recovery of the economy and the demand for credit … so the situation pandemic-wise is not like it was in the first wave or second wave,” he said.
Its chief rival, Leumi (LUMI.TA) said its board would discuss dividend issuance when it issues second-quarter results this month. Mizrahi Tefahot (MZTF.TA) and Israel Discount Bank (DSCT.TA) declined to comment on their dividend plans.
Reporting by Steven Scheer;
Editing by Alison Williams
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