Crédit Agricole SA said Feb. 14 that it will cancel the loyalty dividend it pays to certain shareholders, after it was found by the European Banking Authority and the European Central Bank to have breached banking rules as it constitutes a "preferential distribution."
The cancellation was decided on to avoid a "significant fine" that may hit its solvency ratios. It added that during its May 16 general meeting of shareholders, a proposal will be submitted to remove the loyalty dividend clause from its articles of association. The loyalty dividend will be cancelled by September 2018.
To compensate, eligible shareholders will be given 1 new ordinary share for every 26 registered shares that are entitled to a loyalty dividend for the 2017 fiscal year. The number of new shares to be given was determined based on the compensation amount of 56 cents and the weighted average price of the bank's shares over a 60-trading-day period up to and including Feb. 12, which stood at €14.55 per share.
The decision comes after the bank reported a 3.1% year-over-year increase in its net income group share in 2017 to €3.65 billion from €3.54 billion.