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FP says Big Five banks seen maintaining payouts

2020-04-07 09:15 ET - In the News

See In the News (C-CM) Canadian Imperial Bank of Commerce (CIBC)

The Financial Post reports in its Tuesday edition that regulators in Europe, the United Kingdom and Mexico may be forcing financial institutions to cut or suspend their dividends, but the same is unlikely to occur in Canada. The Post's Victor Ferreira writes that keeping dividends intact is a matter of reputation for Canada's Big Five, which has not cut payouts once since 1940. Not even the financial crisis, which saw banks slash payouts across the board, made the Big Five waver. The reliable stream of income, not the stock performance, is why investors hold the group in such high regard. "The Big Five has such a long history of not cutting their dividends," said Cormark analyst Meny Grauman. "There's an investor premium earned as a result of that huge amount of time, safety and security of the dividend. You'd rather keep that intact and go raise equity at less-than-preferable terms." The global economic shutdown brought upon by the COVID-19 has once again put the Canadian financial sector under pressure. It may not be facing an existential crisis as the U.S. banks did in 2008, but it is certainly in a crunch due to its connections to the hard-hit energy and real estate sectors and the escalation of loan losses.

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