UniCredit Suspends Dividend, Buyback as ECB Takes a Tougher Line

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UniCredit Suspends Dividend, Buyback as ECB Takes a Tougher Line
Credit: © Reuters.

(Bloomberg) --

UniCredit SpA (OTC: UNCRY ) suspended a dividend payment and a share buyback in a setback to Chief Executive Officer Jean Pierre Mustier’s plan to improve shareholder rewards.

The decision comes after the European Central Bank on Friday recommended that lenders restrict payouts until at least October as the coronavirus pandemic wreaks havoc on markets. Its previous call for banks to be prudent on dividends persuaded few major banks to change their policies.

On Friday Andrea Enria, the ECB’s top banking watchdog, said it would be socially irresponsible to withhold dividends “in these exceptional times.” Italy’s Banca Generali (MI: GASI ) SpA and Banca Mediolanum also announced delays to their payouts on Monday, as did Dutch Banks ABN Amro NV and ING Groep (AS: INGA ) NV.

Mustier laid out a new strategy for UniCredit in December, promising that an increasing proportion of earnings would be paid out to shareholders via dividends and buybacks through 2023. Milan-based UniCredit had planned to distribute a dividend of 63 cents a share on 2019 earnings and the board had authorized the repurchase of as much as 467 million ($517 million) euros of shares.

The board will review its policies in October or if the European Central Bank changes its recommendation.

UniCredit will release the 2019 dividend deducted from its CET1 capital, boosting the measure by 37 basis points. The board will not yet accrue any dividend on 2020 earnings. The bank will offer its shareholder foundations interest-free loans equal to the amount of the planned dividends, its said in a separate state.

©2020 Bloomberg L.P.

© Bloomberg. The headquarters of Unicredit SpA, second left, stands in Milan, Italy, on Wednesday, Feb. 26, 2020. As the number of people infected by the coronavirus in Italy rises above 300 -- mostly in the rich, industrial north -- restrictions imposed to stem its spread are threatening deeper economic woes. Photographer: Gianmarco Maraviglia/Bloomberg

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