Bundesbank warns banks against ‘careless’ payout pledges as economy cools

  • Wuermeling says banks should not be helpless
  • See how German banks maintain capital ratios

FRANKFURT (Reuters) – Bundesbank board member Joachim Wuermeling told Reuters that despite strong profits this year, German lenders should avoid making multi-year commitments to shareholders because of the economic outlook. is deteriorating.

He joined other supervisors at the European Central Bank in telling lenders to preserve capital – a message that angered bankers as they tried to lure investors into their battered shares.

“We essentially warned banks not to make medium-term commitments to investors about dividend payments,” Wuermeling, a member of the ECB’s supervisory board that oversees the euro zone’s largest lender, said in an interview.

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“If you’re tied down by a commitment like that, even if circumstances change dramatically, you’re going to be in a very difficult position.”

Banks have been reporting fat profits and announcing dividends and share buybacks, fueled by sharply rising interest rates and a trading boom after more than a decade of meager returns.

Italy’s UniCredit (CRDI.MI) has defied the ECB’s preference for payout ratios, setting a hard figure for shareholder pay under a plan through 2024, with CEO Andrea Orcel even promising to hit this year’s €3.75 billion next year. distribution target.

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In Germany, where the Bundesbank predicts a mild recession next year, Deutsche Bank (DBKGn.DE) wants to boost its next dividend by 50% as part of a plan to distribute 8 billion euros ($8.22 billion) through 2025.

Commerzbank (CBKG.DE) will pay its first dividend since 2020 next year.

Wuermeling said Deutsche Bank has only modestly increased payout ratios in its own plans and that most banks should still manage to maintain their capital ratios even considering the large increase in dividends in absolute terms.

But he added that this year’s huge profits should not lead to “carelessness”.

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“Next year is likely to be a bit colder. That’s why we tend to recommend putting money in banks to offset any losses,” he said.

“The current situation is still good and should not lead to carelessness.”

He added that the Bundesbank was “not thrilled” by the European Commission’s decision to delay the implementation of Basel III rules until 2025, but said it was “only a temporary departure” from globally agreed standards.

($1 = 0.9740 EUR)

Reporting by Francesco Canepa and Frank Siebelt Editing by Tomasz Janowski

Our Standards: The Thomson Reuters Trust Principles.


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