CBSL removes banking sector dividend restrictions
By Ishara Gamage
The Central Bank of Sri Lanka (CBSL) on Tuesday (19) decided to permit licensed commercial and specialised banks to defer the payment of dividends for the year ended 31December 2020 till the financial statements have been finanlised by the respective external auditor.
This effectively means that banks can now start paying dividends for 2020 from end February 2021 (financial statements are usually finalised end Feb).
Commenting on the CBSL decision, Capital Alliance Securities (Private) Limited stated that the resumption of dividends will be positive for the banking industry given that it could bring back the yield starved investors into the high dividend yielding banking shares.
CBSL has mentioned that the licensed banks should give due considerations to capital adequacy requirements, expected asset growth, business expansion and the impact of the pandemic when deciding on payments of cash dividends and repatriation of profits.
Another stock broking firm CT CLSA SECURITIES (PVT) LIMITED believe licensed banks with a Tier 1 capital buffer in excess of 2% to be in a comfortable position to declare immediate short-term cash dividends.
In May 2020, the Monetary Board of the Central Bank of Sri Lanka restricted the payment of cash dividends until Dec 2020 due to the initial concerns on liquidity and capital adequacy owing to the economic impact from COVID-19.
Meanwhile, licensed banks incorporated outside of Sri Lanka will be allowed to repatriate profits following the finalisation of audits of the financial statements for the year 2020. Moreover, licensed banks will be allowed to buy-back their own shares from 30 June 2021.