Why banks postponed dividend pay
The road banks still have to travel to approach normalcy is strewn with pitfalls, despite the high profitability recorded in 2022. This is confirmed by the shift in their intention to distribute dividends by one year.
There are three main reasons for that decision, the first being banks’ need to protect their profitability through stable and recurring profits.
The second concerns their need to further strengthen their funds by at least 150 basis points. Greek banks have one of the lowest capital adequacy ratios in the EU, and although they are above the supervisory requirements, the deterioration of economic conditions requires vigilance due to the high costs to meet the minimum requirements for own funds and eligible liabilities, known as MREL.
The third reason is the high deferred tax they have on their funds, which due to the lack of conditions for its faster reduction constitutes a burden if combined with their relatively low capital cushion.
For all these reasons, local banks remain vulnerable to a possible worsening of the economic climate. Therefore the dividend distribution has been postponed for at least a year, until the supervisor gives the green light.
