By Pietro Lombardi 
 

Societe Generale SA has cancelled the dividend for 2019 following a recommendation from the European Central Bank and suspended its targets for this year due to uncertainty related to the coronavirus pandemic.

France's third-largest listed bank by assets is the latest lender in the region to take a similar step on dividends--Italy's UniCredit SpA and Intesa Sanpaolo SpA have already suspended dividend payments--after the ECB asked the region's banks not to pay dividends or buy back shares during the coronavirus pandemic.

The ECB wants banks to boost their ability to absorb losses and support the economy as the eurozone braces for a sharp economic slowdown caused by the pandemic. For this reason, it asked banks not to pay dividends for 2019 and 2020 at least until Oct. 1, adding that lenders should also avoid buybacks.

The October deadline is incompatible with French laws, under which dividends have to be paid by the end of September, so the bank decided to scrap the payment even though it didn't have to take a decision before October. SocGen said late Tuesday that it would give new guidelines on shareholder returns in the second part of the year. These may include an interim or exceptional dividend.

The dividend cancellation boosts SocGen's core capital ratio to 13.2% as of December, up from 12.7%. It had proposed a cash dividend of 2.20 euros ($2.42) a share for last year.

The bank also suspended the targets for the year it set in February due to the high degree of uncertainty related to the coronavirus pandemic. These included growing revenue and a lower cost base, as well as an improvement of its return on tangible equity--a key measure of profitability. It said in February that it was unlikely to deliver a return on tangible equity of 9% to 10% for the year, which it had targeted, but this remains a midterm target.

"Given the uncertainties related to the magnitude and duration of the Covid-19 pandemic, the group is currently analyzing potential scenarios and their impact on the group's results, as well as potential corrective measures," it said.

 

Write to Pietro Lombardi at pietro.lombardi@dowjones.com

 

(END) Dow Jones Newswires

April 01, 2020 01:58 ET (05:58 GMT)

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