Canada’s banks have been given approval to resume dividend payments and share buybacks.
The Office of the Superintendent of Financial Institutions (OSFI) has said that, effective immediately, federally regulated lenders will be allowed to hike regular dividends and executive compensation. Share buybacks can also resume, subject to the regulator’s approval.
The decision comes more than a year and a half after the country’s federally regulated banks were told to stop raising their dividends and buying back shares as OSFI sought to ensure Canada’s financial system could withstand the global pandemic.
However, not only did the banks withstand the pandemic, they thrived as the feared wave of loan defaults never materialized.
As a result, they’ve seen their capital climb well above required levels – which has spurred anticipation for the day when they’d be able to share the wealth with investors.
In a report to clients after OSFI unshackled the banks, Barclays Capital said that among Canada’s big six, Bank of Montreal and National Bank of Canada are best positioned for big dividend hikes in the near term, while Laurentian Bank stands out among the regional lenders.
Canada’s big banks are estimated to be sitting on $48 billion in excess capital after they raise their dividends -- which opens the door for share buybacks, mergers and acquisitions, or what the industry calls "inorganic" growth.
