Despite falling profitability amid low interest rates, about 80 percent of regional banks across the nation expect to keep their dividends for the year through March 2021 unchanged from the previous year, a Jiji Press survey has shown.
In their latest earnings reports, 63 regional banks estimated their dividends for the current business year would be at the same levels as in the previous year, while four banks projected higher dividends and 14 forecast lower payouts.
Meanwhile, 56 regional banks — or nearly 70 percent of those polled in the survey, released Monday — are now bracing for declines in their annual group net profits.
Over the last five years, regional banks’ combined net profits decreased about 30 percent, while their total dividends remained at around ¥200 billion.
On top of low interest rates, COVID-19 is affecting the earnings of regional banks as it impacts their business partners.
The Financial Services Agency appears to view the status quo in many regional banks’ dividend policies as problematic, believing that they should curb dividends and step up support for local businesses struggling amid the virus crisis.
“Capital adequacy is necessary for banks to make forward-looking investments and provide financial support for businesses,” a senior FSA official said.
Among regional banks, however, there are persistent concerns that dividend cuts could trigger falls in their stock prices.
By maintaining the dividends, regional banks “apparently intend to show that their financial status is good enough, even under the coronavirus crisis,” said Daiwa Securities Co. analyst Takahiro Yano.