LatAm banks set to begin normalizing dividends in 2021

Banks in most of the biggest economies in Latin America will begin to normalize dividend distribution this year, analysts say, with Argentina standing out as the only nation in the region to have extended an outright ban on payouts until June of 2021.

Banco Central de la República Argentina’s extended ban was first imposed in March 2020. Analysts are calling it the strictest dividend policy by any regulator among key economies in Latin America. Most other regulators either made recommendations or placed caps on banks’ dividend payments, but none of them enforces a complete prohibition.

Brazil’s regulator chose to put caps on dividend payments, and between April and December of 2020, lenders were only permitted to pay shareholders up to the mandatory minimum required by law or by their own bylaws.

Those restrictions were relaxed slightly last month, when Banco Central do Brasil permitted the disbursement of whichever was higher between 30% of net profit or the minimum mandatory dividend specified in bylaws. After its March Financial Stability Committee meeting, where they are expected to discuss the resilience of capitalization levels, the regulator is expected ease limitations further. “We do believe that by the end of this quarter we should be above 13.5% [Tier 1 Capital level] … and then we will … go back to the [dividend distribution] policy … we always had,” Candido Botelho Bracher, CEO at Itaú Unibanco Holding SA, Brazil and Latin America’s largest bank, confirmed.

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