Reuters logo
UPDATE 1-Slovak banks may need to curb dividends, central bank says
May 26, 2016 / 3:17 PM / a year ago

UPDATE 1-Slovak banks may need to curb dividends, central bank says

(Adds quotes, details on sector profit, buffer)

BRATISLAVA, May 26 (Reuters) - Slovakia’s banking sector remains resilient, but lenders may have to curb dividends as low interest rates dent profits and capital rules become tougher, the central bank said on Thursday.

Presenting its annual health check on the financial sector, the central bank also said it was still considering imposing a so-called counter-cyclical capital buffer on banks, to prepare them for any future economic downturn.

Slovak banks, which are mostly foreign owned, have held up well in recent years, backed by low loan-to-deposit ratios, relatively high capital levels and an economy that has outpaced euro zone peers.

In 2015, net profit in the sector grew 12 percent.

However, low interest rates around Europe are starting to bite into profits, with some banks trying to compensate through higher lending. At the same time, banks face stronger capital requirements following the global financial crisis.

Marek Licak, head of the Slovak National Bank’s macroprudential policy division, said banks may have to adjust with new dividend policies in future.

“If banks do not change their policy and current trends continue and they want to fulfil new capital requirements, then something will have to change,” he said.

Slovak banks must meet a 10.5 percent capital requirement, while the biggest banks face additional buffers of 2-3 percent.

The sector average was 17.7 percent in 2015.

The main Slovak banks are CSOB, owned by Belgium’s KBC ; Postova Banka, part of J&T financial group; Erste Group’s Slovenska Sporitelna; Raiffeisen’s Tatra Banka; and VUB, owned by Intesa Sanpaolo.

The neighbouring Czech Republic became the third European country to impose a countercyclical capital buffer (CCB) in December, set at 0.5 percent.

The Slovak central bank said all the indicators it watches when weighing whether to introduce a CCB had increased.

This includes a growing tempo of lending to households and businesses, a more favourable development in credit risks, and home prices growing faster than household income.

It will discuss the CCB in July. (Reporting by Tatiana Jancarikova; Writing by Jason Hovet; Editing by Susan Fenton and Mark Potter)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below