Rabobank is standing by its exceptional investor return policy out of its 2020 earnings, with CEO Wiebe Draijer saying it is important to have a stable payment policy amid the current operating and regulatory environment.
Along with the announcement of its full-year 2020 results, the Dutch banking group said it would make exceptional quarterly distributions of 13.674 cents per Rabobank certificate in March, June and September a policy decided upon in consultation with the European Central Bank. CFO Bas Brouwers told analysts that the bank has the full discretion to make any payment in the fourth quarter and that that payment, if any, could be lower or higher than the ones intended for the first three quarterly payouts.
On coming up with the policy, Draijer said the bank wanted to utilize the available room in the ECB's recommendations on capital returns amid the COVID-19 crisis.
In response to a query about whether it was possible for the bank, with the ECB's permission, to distribute scrip dividends instead, the CFO said such an idea "has not been under discussion for this time." He added that Rabobank wanted to utilize its cash capacity "and that's what we optimally use for this moment."
In August 2020, Brouwers said distributing scrip dividends instead of cash was a possibility.
So far, retail investors, which hold roughly €8 billion of the bank's certificates, have been relatively quiet about the exceptional distribution, Brouwers said, adding that last year's decision to pay stock dividends came as a "bigger surprise."
The quarterly distributions in total would be equivalent to roughly 50% of the bank's 2020 net profit, Brouwers said, adding that Rabobank intends to return to its normal payment policy as soon as the ECB's recommendation lapses.
2020 earnings
Rabobank attributed the 50% year-over-year decline of its 2020 net profit to €1.10 billion to hefty impairment charges resulting from the pandemic roiling the markets. The 2020 figure is the bank's lowest since 2017.
Impairment charges on financial assets jumped to €1.91 billion from €975 million in 2019. The impairments accounted for 46 basis points of the bank's average loan portfolio, against 23 basis points in 2019 and a 10-year average of 30 basis points.
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Brouwers also attributed the lower results to a low-interest-rate environment and the slowdown in economic activity during the pandemic, as well as exceptional items including restructuring costs, impairments related to the bank's stake in insurer Achmea BV and fair value items.
For 2021, Chief Risk Officer Els de Groot said impairments are expected to fall below the 2020 level, noting that the bank's asset quality is "holding up relatively well."
