ISP Intesa Sanpaolo Spa

   By Pietro Lombardi 
 

Intesa Sanpaolo SpA has decided to suspend its dividend payment for 2019 following a recommendation from the European Central Bank and will move forward on its bid for smaller rival Unione di Banche Italiane SpA.

The Italian bank said Tuesday that the payment of the cash dividend it proposed for 2019--19.2 euro cents (21.4 U.S. cents) a share--would be suspended and its entire 2019 net profit allocated to reserves. A proposal in this direction will be presented to the shareholders at a meeting scheduled for April 27.

The decision follows similar steps taken by other European banks, including Italian rival UniCredit SpA, after the ECB asked the region's lenders not to pay dividends or buy back shares during the coronavirus pandemic.

The ECB wants banks to boost their ability to absorb losses and support the economy as the eurozone braces for a sharp economic slowdown caused by the pandemic. For this reason, it asked banks not to pay dividends for 2019 and 2020 at least until Oct. 1, adding that lenders should also avoid buybacks.

Intesa also said it will press ahead with a takeover bid for UBI Banca it launched last month.

"The strategic rationale for the transaction takes on even stronger significance in the aftermath of the Covid-19 epidemic, specifically in respect of cost synergies, the increase of the NPL [nonperforming loans] coverage ratio and the reduction of unlikely-to-pay loans and bad loans," it said.

The capital increase related to the offer will also be part of the shareholders' meeting in April, it said.

The suspension of the dividend will further reinforce Intesa's capital and help the bank's common equity tier 1 capital, exceeding the requirement increase to around EUR19 billion.

However, it plans to convene a shareholders' meeting after Oct. 1 to distribute part of the reserves to shareholders by the end of the year. This will be subject to some conditions, namely "indications that will be given by the ECB in respect of this and the group's solid capital position being preserved in respect of the evolution of the context following the Covid-19 epidemic," it said.

Write to Pietro Lombardi at pietro.lombardi@dowjones.com

(END) Dow Jones Newswires

March 31, 2020 07:16 ET (11:16 GMT)

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