The dividend increase from 20% to 25% could occur even if bank profit growth stagnates, Toronto-based Hamilton Capital Partners said on Tuesday. The hikes could be even larger if bank executives want to slow the growth of their capital levels, the company said.
Canada’s largest banks spent record amounts of capital during the pandemic to protect themselves against a wave of defaults that never happened, while also seeing basic profit measures increase.
At the same time, the Office of the Superintendent of Financial Institutions Canada has prevented them from repurchasing shares or increasing dividends since March 2020, prompting capital to accumulate even more. Canada’s lenders are now “among the best capitalized banks in the world” and have $ 21.4 billion (US $ 17.3 billion) in loan provisions that are still in good standing, according to Hamilton Capital, which was co-founded by the former National Bank of Canada. Canadian analyst Rob Wessel.
“This huge pool represents a powerful firewall against unexpected loss,” the company said. “There has literally never been a time in Canadian banking history when the industry was in a better position to pay dividends. “
OSFI’s restrictions are expected to be lifted this quarter because there is “simply no political justification” for them to continue, the firm said, which also maintains the restrictions should have been lifted two quarters ago.
Peter Routledge, OSFI’s new director, said in a June interview with BNN Bloomberg Television that financial uncertainty is “diminishing”, but that the regulator was not ready to authorize payment increases to the era. “Please, I would ask people, be patient,” he said on June 29.