The big Canadian banks could learn this week that they can again increase the dividend paid to their shareholders and buy back shares.
The Canadian banking regulator will make an announcement on Thursday about the distribution of capital targeting federal financial institutions.
Superintendent of Financial Institutions Peter Routledge will deliver remarks Thursday afternoon at 2 p.m. discussing the strategic agenda priorities of the independent federal body responsible for regulating financial institutions.
Peter Routledge’s speech will be followed by a media availability with reporters at 3 p.m.
Due to the challenges posed by the pandemic and economic conditions, the Office of the Superintendent of Financial Institutions asked financial institutions in March last year to halt any process of increasing dividends or buying back shares.
The banking supervisor had adopted these and other measures to strengthen the resilience of financial institutions and improve the stability of the country’s financial system and economy.
Now that the worst of the crisis seems over, the time to lift the ban may have arrived.
In interview with Press at the end of May on the sidelines of the presentation of the quarterly results of the National Bank, Louis Vachon – then CEO of the bank – had indicated that he expected the regulator to once again allow banks to increase dividends and buy back shares during the fall.
Louis Vachon had said in the same breath that the National Bank should be in a good position to increase its dividend “possibly quite substantially on a recurring basis” as soon as it would get the green light from the authorities to do so.
As for buying back shares of the bank for cancellation, Louis Vachon had specified that it would depend in particular on the acquisitions that can be made.
At Desjardins Securities, analyst Doug Young expects an average initial dividend bonus of around 12% from major Canadian banks. The National Bank and the Bank of Montreal are, according to him, the banking institutions positioned to initially announce the strongest increases.
Investors have therefore been anticipating and have been waiting for a while for the day when the big banks will be able to start subsidizing dividends again, which may explain part of the strong appreciation of bank stocks on the Toronto Stock Exchange in recent months.
National Bank shares, for example, are up 45% this year and have almost tripled since their low reached in March last year. The action of the National Bank is today at an all-time high, having approached the threshold of $ 105 last week.
The Office of the Superintendent of Financial Institutions oversees and monitors more than 400 financial institutions and 1,200 federal pension plans to determine whether they are in good financial health and are meeting the requirements applicable to them.